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CHAPTER XVII

FIRE-INSURANCE RATING (Continued)-SCHEDULE
RATING

Without attempting to trace all the various rating schedules which have characterized the fire-insurance business in the past, or are now applied to certain special types of property, let us analyze the leading schedule of to-day, namely, the "Universal Mercantile Schedule." As its name suggests, this schedule was framed for the rating of mercantile property, by far the most important class, both as to value and the number of risks. It is the product of hundreds of eminent underwriters under the leadership of Mr. F. C. Moore, and represents their united underwriting experience. "It is," as Mr. Richard M. Bissell writes, "so far as results yet obtained are concerned, the most important of any of the tariffs which have been issued. It is also, of all rating schedules, the one which had been carefully and minutely elaborated and adjusted to meet the almost infinitely varied combinations of the factors of construction, occupancy, and protection which are to be found in the mercantile buildings of a large city. This schedule was a great advance beyond anything before known in the history of scientific rating, and has exercised a very important and growing influence upon the framers of other schedules subsequently made, many of which are but imperfect adaptations of the Universal Mercantile Schedule.''1

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1Richard M. Bissell's lecture on "Rates and Hazards," Yale Insurance Lectures, pp. 115, 116.

Standards in the Universal Mercantile Schedule.—The starting point in the fixing of a rate on a non-fireproof brick building under the Universal Mercantile Schedule is the adoption of a standard—a standard building in a standard city—by which to judge other risks which may be poorer or better in quality. A standard city is one with gravity waterworks with sufficient power to throw water over fivestory buildings, and with water pipes and mains not less than six inches in diameter in the dwelling section and not less than eight inches in the mercantile section. It must have a paid fire department with twelve men to each steamer, and with at least two steam fire engines to each square mile of compact portion. Among other requirements, this city must also possess a fire-alarm telegraph, an efficient police, paved or other hard streets, the majority of which are seventy feet wide, a good building law, no outlying exposures such as lumber districts to cause sweeping fires, and a previous five-year record not exceeding $5 annual fire loss per $1,000 of insurance.

A standard building, as defined by the schedule, is one with brick or stone walls at least twelve inches thick at the top story and increasing four inches in thickness for each story below to the ground. Among other requirements, the building may not be over 2,500 square feet in area, or over four stories high, and the floors, windows, beams, girders, walls, and doors must be of approved construction, so as to resist the progress of a fire. For such a standard building, situated in a standard city, the schedule fixes a rate of 25 cents per $100 of insurance, and this rate—the "basis rate" —is the starting point in the computation of all rates. If the building or city under consideration does not measure up to the standard adopted, the actual rate charged is found by adding certain charges to this 25-cent basis rate for any defects, or by deducting certain charges from this rate for exceptionally good features. In framing the schedule the committee which undertook the work aimed "to secure a rate on which the fire cost of the past five years per $100 of insurance would result in such percentage of the premium as, with an allowance for proper expenses, and, also, for accumulation for periodical and inevitable sweeping fires or conflagrations, would leave a'margin for a moderate profit not exceeding five per cent.''

The "basis rate" being fixed at 25 cents, the first step in the process of rate-making is to determine the rate on a standard building in the given city. This is done by adding charges to the 25-cent rate for special hazards of the city in which the property is located. Thus, to illustrate, if the town has no fire department, an addition of 32 cents is made to the 25-cent rate. If there is no building law, the extra charge for this item is 3 cents; while if there is danger of sweeping fires from outlying exposures, such as extensive lumber districts, the charge is 5 cents. In all, some thirtyone deficiencies of the city are provided for in the schedule. Deductions from the original 25-cent rate are permitted, however, for certain exceptionally good features of the city. After all such additions and deductions have been made, the result is the basis rate for a standard building in the given city. This rate, the "key rate," as it is designated in the schedule, is then used as the starting point for rating all buildings in the city.

Variations from the Standard.—But most buildings will not measure up to the standard building, and further additions must, therefore, be made to the "key rate" for any deficiencies which may be found. If, for example, the walls have an average thickness of less than twelve inches, a charge of not less than 8 cents is added to the rate. If the roof is a shingled one, 15 cents is added, while for a slate roof the addition is only 2 cents. For wooden ceilings not less than 5 cents is added for one story and 3 cents for each additional story. Numerous other charges, all carefully

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If boiler in fire-proof room cut off in approved manner, no charge.

POWER–112 Charge according to hazard...... - - - - - - - - - -- • * * * * * * * * * *

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No cellar or basement, deduct............................. 10%
SMALL RIsks under 1500 sq. ft. ground floor area and not over

3 stories high. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%
Tin or sheet-iron between floors............................ 5%
Water-proof paper or cemont betwcen floors.................2%
Floors water-proof and also inclined with scuppers to carry off

surplus water to sewer. . . . . . . . . . . . . . . . . . . . . ............. 5%

121a. If floors exceed 3 inches in thickness, deduct 1% for each excess

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inch (in addition to 119, 120 and 121)........................ If grade floor fire-proof........... - - - - - - - - - - - - - - - - - - - - - - - - 10% Each fire-proof floor above grade (not czceeding a total of 40%) 5% Metallic studs and lathing, throughout. .......... ---------- 10% Metallic lathing on wooden studs........................... 5% PARAPET WALLs exceeding one foot above roof on all exposed sides, deduct for each foot in excess of one (not exceeding a total of 8%). . . . . . . . . . . . . . . . . . . . . . . ............. ... . . . . . . .1%

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RATE OF BUILDING UNOCCUPIED. Forward (ovKR)................... . . . . .

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127 RATE OF BUILDING UNOCCUPIED (BRought Forward).............................. Occupied by Nos...................... . . . . . . . . . . . . . .

- ------------ (as per table page 143) Add for occupancy (amount in first column of table, page o; - - - - - - - - - - - - - - - - - - - - - - - - - - - (Selecting charge for the most Hazardous occupancy in the building.) 128 RESULT—RATE 0F BUILDING 000UPIED.............................................. DEDUCTIONS FOR FIRE APPLIANCES, ETC. 0N BUILDINGS. No. [Per. Ct. 155 One hydrant supplied by 8-inch water-main, within 300 feet........ 5% 156 Two or more hydrants (8-inch) main within 300 feet............... 10% 157 If said water-pipe be fed at both ends by mains........ .5%; (15% in all) (If 6-inch pipe, one-half above deductions No. 155, 156, 157) 158 Automatic fire-alarm signal to central stution or sire dept........... 5% 158a Burglar alarm, approved system to central station................. 2% 158b Special building call direct to fire dept, (ene half allowance if no watchman) 5% 159 Chemical engines on wheels, available in case of fire................ 5 160 Iron fire-escapes outside of building, with landings at each floor..... 2% 161 Casks of water or filled pails on each floor (6 filled pails to each 2,500 square feet of floor area), 5%; (if no hydrants within 300 ft. 10%)... . . . (One-half number may be filled with sand. One cask may be cousidered the equivalent of three pails.) 162 Standpipe, internal with tank supply............................. 2% 163 -- “. . without tank supply.......................... 1% 164 44 external with siamese connection for use of fire dept..... 1%

165 Each side or rear accessible to fire dep’t (no deduction for front)..... 3%

166 Fire department house, engine, hose or hook and ladder, within 300 feet 2%; if next door or on opposite side of street 5

167 Basement and sub-cellar perforated pipe sprinklers............... 2%%

168 Automatic sprinklers in basement, (no deduction if allowance has becn made for sprinklers throughout building).......................

169 Occupancy, exclusively dwelling above grade floor, if one family 20%

(if only one nor so occupied, deduct 10%)

170 44 if two families,................. 15% 171 -- 44 -- if more than two families........ 10% 172 -- if tenement house above grade floor.................... 5% 173 -- if building occupied throughout exclusively for offices or dwelling and offices............................ .... 25% 174 -4 if occupied exclusively above grade floor for offices, or offices and dwelling................................. 175 Watchman but no watch clock................................... . 5%

176 -- with watch clock or electric detector, (one-half deduction for

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