Improvements in or relating to a System of Insurance for Protecting Merchants and others from Excessive Losses by Bad Debts.
Year: 1891

page_text: Date of Application, 22nd Dec., 1891-Accepted, 27th Feb., 1892
COMPLETE STROITTOA.
Improvements in or relating to a System of Insurance for Protecting
Merchants and others from Excessive Losses by Bad Debts.
A communication from LEVY MAYBAUM, of Newark, New Jersey, United States
of America.
I, ALFRED JULIUS BOULT of 323 High Holborn in the County of Middlesex,
M.I.M.E., do hereby declare the nature of this invention and in what manner the
same is to be performed to be particularly described and ascertained in and by the
following statement :-
This invention relates to the art, method or process of securing merchants and
plan,
others from excess losses by bad debts, and its object is, first, to provide a
process or system by the employment of which this result may be accomplished
and second, to provide means which may be used in practising the said process.
Merchants and others, in Europe, have no way of limiting their losses by bad
debts; customary losses are not injurious but at any time these losses may exceed
what is the average or customary loss, and the profits and capital be thereby
seriously affected.
By a careful observation of statistics and other sources of information, my
correspondent has ascertained that the average losses due to bad debts, vary in
different lines of business, and he has compiled tables showing what the average
percentage of losses in the principal lines or classes of business are, and have been
for a series of years.
My correspondent has also ascertained that in those lines of business in which
there is a large percentage of average loss, there is also a larger percentage of
average profit.
My correspondent has invented a plan or process by means of which assurance
may be given to merchants and others, so that they will feel at ease on the subject
of fosses by bad debts; this plan or process is based upon the ascertainment of said
average losses in the various lines of business. It is not practicable to guarantee
persons in business against any loss whatever from bad debts or to guarantee against
all losses from any and all customers generally, as such a course would induce
recklessness in giving credit on the part of the person guaranteed.
Credits are placed in accordance with the capital worth of the purchaser. The
capital worth of the purchaser is however not the only basis by which to gauge the
amount of credit to be given. For instance, A. may be worth £10,000 and B may
be worth £10,000, but the reputation of A as to promptness and as to antecedents
may be higher than that of B while the information about B might still be not
unfavourable. In such a case A would be credited with the highest amount usually
credited to parties with such a capital, which for illustration we will say is £1000;
while to B with the same capital but not quite as good reputation as to promptness
and antecedents a credit of-say two thirds of the former or £666, would be given.
Merchants and others are also classified as to volume or amount of business done
by them, for instance in the following manner :-
Houses whose yearly out-put is £20,000 or less-Class 1.
Houses whose yearly out-put is £40,000 or less-Class II.
Houses whose yearly out-put is £60,000 or less-Class III.,
·

page_text: in a graded scale; for instance the cloth line if Class I should be accustomed to
lose 2% Class II might not be accustomed to lose over 1% and Class III not
over 1 as the case may be.
It is proposed to issue policies or certificates guaranteeing merchants and others
that their losses will not exceed the average or customary loss on parties classified
in accordance with this plan or system.
There are established to-day, in nearly all parts of Europe mercantile agencies,
for furnishing merchants and others with confidential reports as to the standing of
purchasers. It is my correspondent's intention that such reports be furnished to
him by the party guaranteed or directly by the mercantile agency. On receiving
such reports it is my correspondent's intention to re-print or re-transcribe them,
with distinguishing characteristics for example as to colour or form, and return
them to the merchant or agency.
The colour or other distinguishing characteristic of the report is to indicate the
amount of credit that will be guaranteed on such a party. For instance, if the
report should show a capital worth of £100,000 or over, with an unquestioned
credit, such report would be returned, we will say, on blue paper. If the report
should show a capital worth of the amount just stated but credit not quite
unquestioned, such report might be returned on half blue and white paper; in this
manner each amount of capital and different grade of credit may be systematized,
so that cach purchaser is gauged according to his capital worth and credit, and the
party guaranteed on the mere sight of the report can at once tell the amount that
such party is guaranteed for..
If the party guaranteed should make losses on such reports (the credit on any
report not exceeding the amount allowed) in excess of the percentage arranged for
such party as the customary or average loss, then such excess would be paid.
To illustrate this: -If a merchant's out-put should be £100,000 and his average
or customary loss for that volume in his line of trade should be arranged at 1%,
that would make £1500 as the loss that the merchant would first have to bear
himself before my correspondent would be liable for anything; and if his losses on
parties who had reports bearing the agreed distinguishing characteristics should
exceed £1500 the excess would be paid. Of course in such calculation of losses,
if the limit which was allowed on a certain report was £500 and his loss on such a
party was £800, the loss would be taken into the calculation of losses for only £500,
the limit which was allowed on such report.
In practising this process or system certain tables and forms are used. Tables
showing the average losses in the various lines of business are employed. The
forms or reports which are re-printed are like the ordinary confidential commercial
reports, except that such have a distinguishing characteristic disclosing the class,
according to this system, to which the party reported therein belongs. The forms
of policies have blank spaces to be filled in as indicated by the rest of the sentence,
containing the space. There is a space for the name of the assured, another for the
name of the commercial agency whose reports are to be re-printed by the assured,
others for setting forth the characteristics of the several reports covered, another
for the percentage on gross sales beyond which loss is guaranteed and another for
the amount beyond which loss is not guaranteed, of course other spaces may
be provided for other conditions of the transaction without departing from this
invention.
Having now particularly described and ascertained the nature of the said inven
tion, as communicated to me by my foreign correspondent, and in what manner the
same is to be performed, I declare that what I claim is :-
1. The method or process of securing merchants and others against excessive
losses by bad debts which consists of classifying and tabulating the risks and issuing
policies based thereon substantially as described.
2. The means for securing merchants and others from excessive losses by bad
debts which consists of forms or reports bearing distinguishing characteristics

page_text: adapted to disclose whether or not a loss sustained on dealings with the subject of
such report is covered and forms or policies provided with spaces for entering the
details of the transaction substantially as described.
3. A report of the commercial standing of a party provided with a distinguishing
characteristic substantially as and for the purpose described.
4. A form or policy having spaces for entering the name of the assured the name
of the commercial agency or agencies whose reports are to be accepted the
distinguishing characteristics of such reports the percentage on gross sales beyond
which loss is guaranteed and the amount guaranteed substantially as and for the
purpose described.
Dated this 22nd day of December 1891.
W. P. THOMPSON & BOULT,
Agents for the Applicant.