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risks properly it is necessary that they should be conversant with the nature of different classes of property, with the importance of different classes of exposure hazard, and with the valuation of property. It is needless to say that in this respect the examiners are materially aided by the use of firemaps.

After the daily reports have been passed upon and accepted by the examiners, they go to clerks and statisticians, who compile from them the reports which the company requires for its own information or which are necessary to comply with the statutory requirements for a detailed annual report. The financial accounts of the agents are also carefully checked by auditors and bookkeepers, and afterward sent to clerks for compiling.

Another division of the company's organization is the loss department. It is the business of this department to take charge of the settlement of all losses, and for this purpose, as already stated, special agents or adjusters are employed who try to effect a settlement of each loss as soon as it is reported to the general office. Careful accounts are kept by the department of all the losses and all information pertaining thereto, and the complete reports are then tabulated in the general office and compared with the premiums received. By this means a mass of statistical information is accumulated by which the company is able to measure the relative hazard involved in various classes of risks, and to obtain a knowledge of the cost of different risks, sufficiently accurate upon which to base a correct and just schedule of rates.

Located at the home office of the company and co-ordinating all the different departments, and with a general oversight over all, are the president and other officers of the company. Their duty is to map out and be responsible for the plan of campaign which the department managers and agents are expected to execute. They determine the general policy of the company and exercise general supervisory powers. The board of directors, on the other hand, concerns itself chiefly with the banking and investment features of the business. The importance of fire-insurance investments may be appreciated when we reflect that the combined assets of the joint stock companies in the United States, exclusive of premium notes, in 1909 amounted to $570,911,883. The wise and conservative investment of these vast funds requires financial and business ability of a high order. But the insurance business, proper, requires technical skill and training, and for this reason is left to the care of officers and employees who are acquainted with its details.

Local Mutuals.—The county and town mutuals of the United States are exceeding numerous, approximately 1,500 being now in operation. In most instances they have developed as a protest against the high rates charged by the ordinary stock company. Their plan is to furnish insurance on the payment of a small cash premium, and in case losses exceed their income to depend for the balance upon some system of assessments. The policy-holder, in addition to the payment of the cash premium, is required to assume an extra liability in the form of a note. The liability of the members is usually fixed by the laws of the state or by the charter and by-laws of the company. Ordinarily the cash premium amounts to about one fourth of the premium charged by stock companies, and the note required from the policy-holder is for usually three or five times this sum. In case the company finds it necessary, this note is subject to call. The total liability of each policy-holder may, however, be much larger than the notes which he gave. Thus, according to agreement, the policy-holder may be liable for his share of all the liabilities of the company, or, as is most generally the case, for only a stipulated amount, i.e., a certain percentage of the amount of insurance carried, or a multiple of the amount of premium notes given.

In most instances local mutuals are organized by a group of farmers or by property owners in villages and small cities to secure the lowest possible rates. The business is begun by issuing policies to the original members. After the officers have been elected, and the organization perfected, the business is usually entrusted to the care of a secretary, who in many instances, if the company is small, may also pursue some other vocation, such as law, banking, or storekeeping. In this way the expense item is reduced to a minimum. The valuation of the property to be insured, and the desirability of the applications is usually left to the decision of the board of directors or an executive committee.

Both the merits and demerits of local mutuals are found in the fact that they operate in restricted districts. Because of their local nature they are able to eliminate much of the moral hazard so frequently found in fire insurance. If the company is small, most of the members are acquaintances. It is easier therefore to avoid overvaluation, and it becomes exceedingly difficult for a dishonest man to obtain insurance. Moreover, a man usually does not bring the same loose moral code to bear on his actions when dealing with his neighbors and friends, as he does when dealing with an unknown corporation having headquarters in a distant locality.

But the writing of insurance in a restricted territory also constitutes an element of danger in that it loses sight of the inevitable law of average in insurance. So long as the fire loss record of the locality is sufficiently low or uniform, the mutuals may prosper, but upon the advent of a conflagration they too frequently break down. The number of mutuals that have gone insolvent is an exceedingly large one, and the cause in probably a majority of cases has been a conflagration or an unexpected series of large fires. The system of assessments provided for such contingencies, while ideal in theory, will in practice often utterly fail because of the difficulty or impossibility of collecting the assessments. Some of these companies have been conspicuously successful, and are past the half-century mark of their existence, but it has been mainly due to their strict policy of insuring only a limited number of comparatively non-hazardous risks, or their luck in avoiding a conflagration or rapid series of fires.

Many of the state laws relating to local mutuals recognize the necessity of protecting their members against just such contingencies. Thus in some states, especially New York, they cannot operate in large cities. The New York, Chicago, and Boston conflagrations made bankrupt nearly all the local mutuals operating in those cities, and showed the wisdom of such legislation. Other states limit their activity to the insuring of non-hazardous risks, such as dwellings, farm buildings, and stores when situated in a given district. Many states provide that their business must be confined to a single town or county, or at most to a limited number of counties, such as three or five. In most of the states, before their organization is complete they must produce evidence of having procured applications for a considerable amount of insurance, usually from $50,000 to $200,000, and that a certain portion of the premiums on this amount of insurance, usually 25 per cent, has been advanced in cash.

State Mutuals.—Many attempts have been made, usually with unsuccessful results, to apply the mutual plan of fire insurance over one or more states. But these state mutuals, while retaining the objectionable features of the local mutuals—namely lack of assets, small volume of business, and assessments—also lack their elements of strength. The moral hazard is increased as the territory within which a mutual company does business increases. When such mutuals attempt to write insurance throughout an entire state they necessarily come into competition with the wealthier and more firmly established stock companies, and cannot secure business except at inadequate premiums. They also lack the business organization and the trained staff of experts possessed by the stock companies, and to secure business in sections far removed from the home office, must depend upon agents for the soliciting of insurance and the selection of risks. The result is that the service is not of the best, and the supervision over the selection of risks is woefully inferior to that of the local companies.

As long as the company grows and policy-holders are not called upon to pay assessments, the management hears few complaints, and few members find occasion to trouble themselves about its affairs. The officers in too many instances, ambitiously strive to rapidly increase their business, and in doing so depend upon agents, whose interest it is to write as much insurance as possible. But in the course of time, the poor selection of risks begins to bear fruit. The low premiums are found woefully inadequate, and assessment after assessment must be collected from the policy-holders to meet the ever-increasing claims. It is then that the policy-holders begin to rebel against what they regard as unreasonable charges. As the claims against the company become more pressing, it in turn must resort to pressure, and even litigation, to s collect the assessments, and then follows wholesale withdrawals and at last bankruptcy.

This has been the story of the great majority of state mutuals. By extending their activities over too large a territory personal supervision could not be exercised over the risks accepted, and powers delegated to employees were too often abused or inefficiently exercised. The rates were too low and the hazardous risks too many, and the result could not be other than failure. We are informed that at a recent date only two or three out of the seventy-four state mutuals in New York in 1853 were still in existence. To insure their greater safety a number of states have passed laws with special reference to their organization and operation. The number of applications for insurance which must be in hand before their organization is perfected is usually much larger than is required for local mutuals. The class of business

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