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for the performance of contracts are placed at not more than about one per cent of the risks assumed.
In its daily routine of business Lloyd’s affords an interesting and instructive spectacle, and illustrates the arbitrary character of a good share of the business. On the Exchange, for example, are several hundred underwriters unincorporated, and unable thus to act jointly. To describe the manner in which these members transact business, we cannot do better than cite from Mr. Samuel Plimsoll's concise and picturesque account:
“There are seldom less than fifty underwriters on a policy, frequently over one hundred (the three policies before me show an average of seventy-two subscribers), not bound together at all, each individual can act only for himself, and accepts just so much of the whole risk as he pleases. He seldom, almost never, accepts for any large amounts, always for a very small proportion indeed of the whole amount covered. The way of it is this: A member of Lloyd’s (underwriters’ room) first gives evidence or security as to his ability to pay losses; then he has a desk allotted to him (they are very numerous—between three hundred and fifty and four hundred in London alone, where, however, the bulk of underwriting is done); the proposals of insurance are handed around by the insurance brokers’ clerks all day long. These proposals, called slips, give the name of the ship, amount to be insured, and rate per cent offered. Perhaps sixty or seventy of these slips, or even more, are laid before each underwriter daily. After reference to Lloyd’s List of Ships, he either passes it on or, if he decides to “take a line’ upon it, he subscribes or “underwrites’ his name, together with the amount he is willing to guarantee for at the rate specified. This varies much, and generally goes as low as £200 or 2100, frequently £50, and sometimes even less than that—never an amount large enough to warrant his disputing his liability in case of loss.” "
As a result of the procedure thus described by Mr. Plimsoll, it follows that the underwriter at Lloyd’s has practically no opportunity to examine the risk as he would do in other
"Samuel Plimsoll, The Nineteenth Century, Vol. XXV, p. 329.
leading forms of insurance. The sources of information which he might use as a guide are, as a rule, the publications of the corporation like the Annual Register, the Captain's Register, and Lloyd's List. From these he may obtain useful information concerning the age, size, structure, equipment, and management of the vessel as based on frequent surveys by expert surveyors. But, naturally, such classifications have their limit, and do not purpose giving more than a general description of the vessel in question. Concerning many factors relating to stowage, the amount of load, the size and efficiency of the crew, and numerous other factors, equally vital to the safety of the vessel and cargo at sea, these publications can offer no assistance. It is here that the insurer must use his judgment, and success is largely dependent upon the specialized ability of the underwriter. Nor would it be to the interest of the insurer at Lloyd’s to make such an examination, assuming that he could do so. Not only will his limited time and the large number of proposals made to him daily render this impossible, but the mere fact that probably half a hundred other persons have underwritten the same policy will make it seem foolhardy that he alone should undertake the examination. To retain his business he must be quick in accepting or rejecting proposals on the spot, and cannot afford to tarry, since it is the broker's business to secure insurance for his patrons as quickly as possible. Moreover, the amount of the total risk to which he has subscribed is, as we have seen, comparatively small, and limited to an amount which will not, make it worth his while to contest a claim or pursue an examination. Even if the underwriter be a subscriber for a large amount, it does not necessarily follow that he will be actually liable for the amount underwritten, for as soon as he fears that he has sustained a loss he will endeavor to transfer his risk. This he does by offering a higher premium as an inducement for some one else to take all or a share of his risk. One underwriter fearing a loss thus transfers part of his risk to another, who expects the early and safe arrival of the vessel. If uncertainty concerning the vessel continues, this second underwriter, by offering a still higher premium, may transfer part of his risk to another, who again has good hopes, and so on until, if it is finally learned that the vessel and cargo are lost, the risk has been so widely diffused that the loss incurred by any one individual is comparatively small. Lastly, it is interesting to note that collectively the underwriters at Lloyd's have no interest in examining risks, because they have no interest in diminishing loss. On the contrary, strange as it may seem, they express a preference for a high rate of loss to a low one. Individually, they all desire and expect to avoid the payment of claims, but collectively they all wish and expect to profit by high rates. Hence it is that they prefer the increase in premium which accompanies an increase in losses.
COPY OF LLOYD’S FORM OF POLICY
S. G. BE IT KNOWN THAT .................... as well in — .... own name as for and in the name of all and every £ other person or persons to whom the same doth, may, – or shall appertain, in part or in all, doth make assurance and cause . . . . . . . . . . . . . . . . . . . . . . and them and every of them
to be insured, lost or not lost, at and from . . . . . . . . . . . . . . . . . . . . . . - - - - - - - - - - - - - - - - - - - - - - - upon any kinds of goods and merchandises and also upon the body, tackle, apparel, ordnance, munition, artillery, boat, and other furniture, of and in the good ship or vessel called the . . . . . . . . . . . . . . . . , whereof .......................... is master, under God for this present voyage, ................ , Or whosoever else shall go for Master in the said ship or by whatsoever other name or names the same ship, or the Master thereof, is or shall be named or called, beginning the adventure upon the said goods and merchandises from the loading thereof aboard the said ship, upon the said ship, her tackle, apparel, etc., ............... and shall so continue and endure, during her abode there, upon the said ship, etc.; and further until the said ship, with all her ordnance, tackle, apparel, etc., and goods and merchandises whatso
ever, shall be arrived at port of discharge as above and upon the said ship, etc., until she hath moored at anchor twenty four hours in good safety, and upon the goods and merchandises until the same be there discharged and safely landed; and it shall be lawful for the said ship, etc., in this voyage to proceed and sail to, and touch and stay at any port or place whatsoever, . . . . . . . . . . . . . . . . . . - - - - - - - - without prejudice to this Insurance. The said ship, her tackle, apparel, etc., goods and merchandise, etc., for so much as concerns the assured, by agreement between the assured and assurers in this Policy, are and shall be valued at . . . . . . . . . . . . . . . . . .
Touching the adventures and perils which we, the Assurers, are contented to bear and do take upon us in this voyage, they are: of the seas, men-of-war, fire, enemies, pirates, rovers, thieves, jettisons, letters of mart and countermart, surprisal, taking at sea, arrests, restraints, and detainments of all Kings, Princes, and People, of what nation, condition or quality soever: barratry of the Master and Mariners, and of all perils, losses, and misfortunes, that have or shall come to the hurt, detriment, or damage of the said goods and merchandises and ship, tackle, apparel, etc., or any part thereof; and in case of any loss or misfortune, it shall be lawful to the Assured, their factors, servants, and assigns, to sue, labor, and travel for, in and about the defence, safeguard, and recovery of the said goods and merchandises and ship, etc., or any part thereof, without prejudice to this Insurance; to the charges whereof we, the Assurers, will contribute each one according to the rate and quantity of his sum herein assured. And it is agreed by us, the Insurers, that this Writing or Policy of Assurance shall be of as much force and effect as the surest Writing or Policy of Assurance heretofore made in Lombard Street, or in the Royal Exchange, or elsewhere in London. And so we, the Assurers, are contented, and do hereby promise and bind ourselves, each one for his own part, our heirs, executors, and goods, to the Assured, their executors, administrators, and assigns, for the true performance of the premises, confessing ourselves paid the consideration due unto us for this Assurance by the As
sured . . . . . . . . . . . . at and after the rate of .... per cent. In Witness whereof we, the Assurers, have subscribed our names and sums assured in London, ... . . . . . . . . . . . . . , 191...
N. B.-Corn, fish, salt, fruit, flour, and seed are warranted free from Average, unless general, or the ship be stranded; sugar, tobacco, hemp, flax, hides, and skins are warranted free from Average under Five Pounds per cent; and all other goods, also the ship and freight, are warranted free from Average under Three Pounds per cent, unless general, or the ship be stranded.
(Here may follow various attachments to the policy.)
This policy is issued in the form printed and supplied by the Government previous to 1st August, 1887 (with . . . . . . . . , additions printed in italics).
For signature by underwriting members of Lloyd’s only. (34 & 35 Vic. Anchor. Lloyd’s act, 1871.)
Any person not an underwriting member of Lloyd's subscribing this policy, or any person uttering the same if so subscribed, will be liable to be proceeded against under sec. 31 of Lloyd’s act.
[Space for signatures of underwriters.]
3700 [11- names; “one twelfth” opposite .10 names, “two twelfths” opposite 1 name], of seven hdd. pds.A per (name). £50 [1 name], fifty pds. £600 [21 names], each one twenty first part of six hundred pounds per (name). £500 [21 names], each one twenty-first part of five had. pds. per (name). £500 [12 names], each one twelfth part, five had. pds. per (name). 350 [1 name] £50 [1 name] } fifty pounds per (name). £50 [1 name] #100 [5 names], each one fifth of one had. pds. per (name). £150 [9 names], each one ninth part of one had. & fifty pds. per (name). £150 [5 names; “two sevenths” opposite 2 names, “one seventh” opposite 3 names], of one had. & fifty pds. per (name). #50 [1 name] £50 [1 name] £20 [1 name], twenty pds. per (name). £500, underwriting members of Lloyd’s [20 names], each one twentieth part, five hundred pds. per (name).