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ing of such property. The law of Pennsylvania provides that no company organized in the State is to purchase, hold, or convey real estate, except for the purpose and in the manner described, viz., such real estate as shall be requisite for its convenient accommodation in the transaction of its business, or as shall have been mortgaged to it in good faith by way of security for a loan previously contracted or for money due; or as shall have been conveyed to it in satisfaction of debts previously contracted in its legitimate business or for money due; or which shall have been purchased at sales upon judgments, decrees, or mortgages. Furthermore, any real estate which may have been acquired and which is unnecessary for the accommodation of the company is to be sold and disposed of within five years after the company has acquired title thereto.
As a further protection the law provides that no fire or fire and marine insurance company is permitted to declare any dividend except from the profits which arise from its business. In estimating such profits, there is to be charged as a liability: "The capital stock of the company, together with the amount of the proposed dividend; one half of all the premiums received and receivable on undetermined fire risks, and the whole amount of premiums received or receivable on undetermined marine and inland navigation risks; all sums which are due the company on bonds and mortgages, bonds, stocks, and book accounts of which no part of the principal or interest thereon has been paid during the last calendar year, and for which foreclosure or suit has not been commenced for collection; all interest due or accrued and remaining unpaid, and all other debts or obligations of the company." It is also unlawful for any company organized in the State to pay dividends exceeding 10 per cent in any one year, unless its capital stock remains unimpaired, after charging as a liability, in addition to the items above enumerated, the entire amount of net premiums received and receivable upon all risks undetermined at the time of making such dividend.
As regards the increase of capital stock by companies the law provides that "any fire or fire and marine insurance company may at any time make such increase if authorized to do so by a majority of the stockholders, which increase may be made by increasing the number of shares of stock or increasing the par value of the same and which may be paid in whole or in part out of the accumulated reserve of the company, in case the condition of the company warrants such allotment, or which may be sold as provided for in the law pertaining to the organization of fire insurance stock companies.'' In any case, however, the law is very precise on the point that new stock shall never be disposed of for less than par value. Moreover, before the company is authorized to increase its capital stock, it must file with the insurance commissioner a certificate setting forth the amount and the manner of the desired increase, and the proceedings of the stock owners authorizing the same. An examination of the securities composing the capital stock thus increased is also to be made by the insurance commissioner according to the requirements of the law for the organization of the companies. Watering of stock is thus clearly prohibited by the law of Pennsylvania as regards fire and marine insurance companies. The law again and again states that there shall be no issue of stock, except for value received.
The law of Pennsylvania also regulates the conversion of mutual companies into stock companies. Mutual fire-insurance companies may accumulate a reserve out of the profits of their cash business, and the law states that no mutual company shall be deemed insolvent or can be compelled by the insurance commissioner to make an assessment upon its policy-holders so long as its premium notes in hand and subject to assessment amount in gross to 3 per cent of the entire amount of the risks of the company. In case a mutual fire-insurance company has accumulated $20,000 over and above all liabilities, including the cash reserve required by law on cash risks, and desires to create a capital stock, it may do so with the assent of two thirds in interest of its policy-holders at a meeting especially called for that purpose, such interest to be determined by the amount of premiums paid or premium notes given. Lastly, it is provided by the law of Pennsylvania that the General Assembly may revoke the charter of any insurance company if it deems fit, or if the concern has not started business within one year from the issuance of letters patent. It is provided, however, that such a revocation of the charter must be without injustice to the incorporators.
Besides carefully regulating the organization of companies, the character of their investments, the amount of dividends to be paid, and the issuance of new stock, the several states exercise supervisory power over the business affairs of the several companies, domestic and foreign. This supervisory power is exercised by the individual states, in view of the fact that insurance, having been declared by the courts not to be an article of commerce, does not come within the control of the federal government, and thus is relegated entirely to the legislative and supervisory powers of the individual states. But this phase of state control will be discussed in the chapter on the '' State Regulation and Supervision of Fire Insurance."
The Organization of Stock Companies.—Judging by the total premiums received in the year 1908, the stock companies transacted 88 per cent of the fire insurance of the country, or over seven times as much as was written by all the other types of companies combined. As a rule, these companies operate over a widely extended territory, and of necessity require a large and intricate organization. Some companies seek business only in the larger cities. A widely distributed business, however, is desirable in order to make the loss ratio from year to year as uniform as possible, and for this reason most companies extend their efforts into any territory which offers a profitable business.
The most important department of a stock company's organization, especially in point of size, is the underwriting department, or that which has to do with the solicitation and writing of policy contracts. The customary plan of the companies is to divide the territory within which they operate into districts, and place each under the supervision of a general agency. The offices of this agency are usually located in the larger cities, with the territory naturally tributary to the same constituting the agency's particular district. In this way it is hoped that the company can be brought into most intimate relations with the local agents and the insuring public. Some companies, however, see fit to adopt another plan, and to place at the head of each district one or more officers, who, in turn, are subject to the immediate supervision of the home office, with the hope of securing more uniform and economical action.
Of supreme importance in the underwriting business is the local agent, for it is through him that the company reaches the insuring public, and secures the business upon which it exists. It therefore behooves the companies to cultivate very cordial relations with the army of local agents, and to secure their efficient services. To this end special agents are employed who travel from place to place within their district, placing new agents, discontinuing unsuccessful ones, securing information concerning the company's risks, and, in general, exercising every means to maintain cordial relations with the local agents, and promote the interests of the company. The local agents usually reside in the smaller towns and cities, and solicit risks directly for the company. In the smaller towns where the business is not of sufficient volume to take all of the agent's time, it is generally carried on in conjunction with some other occupation,
How far is risk from agency?................ Have you personally examined it?..............When?
(If unoccupied, decline). Has assured ever had a fire?.................................................. (If yes, give full particulars by letter.) How Heated?.....................................Of what materials are Chimneys?
Do any Stove Pipes pass through roof, windows or side walls?. (If so, decline ) Decline also if building has cement, tile or composition chimneys. Patent, double metallic chimneys are sometimes safe. If used, examine carefully. If heated by furnaces, examine carefully: one register should be fastened open.
State Value of and total Insurance carried on each item.
Walus. Insurancs. $ f $ $ $ $ $ $ $ $ $ $ $ $ Totals, $ $ Value of Real Estate (buildings included), $..................................... Am't of Mortgage on Real Estate (if any)? Is personal property mortgaged?....................................................... (If so, decline.) How long has assured resided at agency?...............................................(If a newcomer, or the nsk is a business risk in name of a woman, advise fully ) IIow long have you been personally acquainted with assured P................................................................. How Lighted? - is gas made on the premises?............................................................... (If yes, give full particulars by letter, and
if lighted by gas machine, give name of machine, location of tank and air pump.) IF ON MERCHANDISE, how often is inventory taken? Am't of last, $
Does assured keep books of all purchases?...................Cash Book P.... Sales Book P.
Building—Material................... Of Roof. s it a Mansard?..................Of Cornice..................
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N. B.-The questions on this Daily Report are for our records only. We