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which they may accept is carefully limited in certain states while in others a limit is placed upon the amount of insurance which may be written on any one risk.

The Factory Mutuals.—There remains to be considered a class of mutuals, usually called the "factory mutuals," which by their conservative methods and careful management have attained an enviable reputation. Beginning with the Providence Manufacturers' Mutual Company, established by Zachariah Allen in 1835, this plan of underwriting has steadily developed until recently there were eighteen such companies in operation in Massachusetts and Rhode Island, as well as others in different sections of the country, writing over $1,000,000,000 of insurance. The success of these organizations, as contrasted with other mutuals, is chiefly to be attributed to their policy of preventing fire losses, rather than merely paying claims. In the words of Mr. Edward Atkinson, one of the pioneers in this type of insurance, "the only persons who can prevent loss by fire are the owners or occupants of the insured premises. Upon them rests the responsibility for heavy loss, if any occurs, in nearly every fire. All that the insurance company can do is to pay indemnity for loss, which, if large, in nine cases out of ten, is due to the lack of apparatus for preventing loss or to lack of care and order in the conduct of the work. It has always been the practice of the mutual companies and of late, with excellent results, the practice of the stock insurance companies, to instruct owners and occupants regarding their duties to their own property, and to keep them up to the mark by constant supervision and by refusing to grant contracts of indemnity to those who neglect their own duty.''1

When factory owners came to a realization of the importance of reducing the fire waste, they first tried to co-operate

1Quoted from Edward Atkinson's "The Prevention of Loss by Fire," Boston, 1900.

with the stock companies in reducing the fire loss, and consequently the premium charge, but the companies in the main assumed the attitude that they were insuring against fire losses, and not in business to prevent them. Then occurred the Chicago and Boston conflagrations, which made necessary an increase of from 50 to 60 per cent in the rates charged by the stock companies. Factory owners, finding such charges too burdensome, sought relief through efforts at mutual co-operation. Low cost insurance was to be obtained through an organization which would have for its object the twofold purpose of ascertaining and eliminating the causes of fire, and providing the means for extinguishing it, with a minimum of loss, when it should occur.

To this end the factory mutuals have made careful investigations into the different kinds of factory hazards, into methods of lighting and heating, and into the separation and , isolation of dangerous processes. It was the factory mutuals which were most active in bringing about the introduction of automatic sprinkler systems, which, as will be explained later, have so radically revolutionized the methods of fire protection. These companies also set an extremely high standard for construction and fire-extinguishing appliances, with which factory owners must comply before being entitled to become members. As explained by Mr. Richard M. Bissell:1

**In their efforts to ascertain and eliminate the causes of fire, these companies have investigated and endeavored to safeguard all processes used in manufacture. They have investigated methods of illuminating, heating, and lubricating; have devised elaborate plans for the safe construction and arrangement of factories in order that the spread of fire may be retarded and that especially dangerous processes may be isolated; and, finally, have tested and

1Quoted from lecture on the "Organization of Companies," printed in the "Yale Lectures on Insurance, Fire, and Miscellaneous."

applied the most modern and approved apparatus for extinguishing fires. Moreover, when a factory comes into their membership they not only see to it that in all respects its condition is brought up to their requirements, but by frequent inspection they secure the constant maintenance of such conditions. They are, indeed, hardly to be called insurance companies at all, but rather associations of manufacturers with experienced inspectors and engineers, whose work it is to eliminate the possibility of loss or serious damage by fire. The insurance feature only comes into play when, despite their precautions, a damage is incurred. It will be realized that, though the number of fires and the loss resulting therefrom has been very greatly reduced, by these methods a large expenditure is necessary to construct, arrange, and equip a factory in such a way as to bring it up to the standard of their requirements."

The endeavors of factory mutuals along the lines suggested have reduced the fire waste among factories from proportions that were appalling to reasonable figures, and have brought about changes that the stock companies have been compelled in self-defense to adopt. The method of premium payments consists in charging a cash premium according to the nature of the hazard involved, and which is expected to be sufficient for the payment of all losses likely to happen; and then to provide for unforeseen contingencies by reserving the right to assess its members to the extent of say five times the cash premium. Unlike the experience of other mutuals, however, the factory mutuals have had no occasion to exercise the assessment feature. Since 1850, it is said that not a single New England factory mutual has found it necessary to collect an assessment. Instead, the cash premiums have much more than met all losses and expenses, and in nearly all instances have left a large surplus to be divided as dividends among the members.

Lloyds Organizations.—The third and least important class of organizations which do a fire-insurance business are the so-called Lloyds associations of one kind or another, named after the famous Lloyd's of London. These organizations have existed in large numbers since 1890, but in manyinstances were only short-lived. The total amount of insurance written was never very great, their proportion of the country's total fire insurance in the year 1908 amounting to only 2 per cent. Comparatively few of these so-called Lloyds can furnish reliable insurance, and while in some instances these organizations have been in business for a considerable period and have an honorable and successful record behind them, in too many instances the term Lloyd's has been used to imply the financial strength of the London organization, whereas in reality there is little financial responsibility back of the project, and its real purpose is the collection of premiums so long as these exceed the claims for losses.

Lloyds organizations may be defined as voluntary partnerships of groups of men, in which each member agrees to hold himself individually liable for the payment of losses up to a specified amount. In most cases, therefore, the value of the insurance contract depends upon the financial strength of the members in the partnership, though in some instances greater security is offered in the form of a guarantee fund which is available for the payment of losses. In too many cases, also, the policy contracts issued by these organizations contain a provision which protects the underwriters by providing that in case of a conflagration each partner can be held liable only to a certain fixed amount on all outstanding contracts, a provision which makes the insurance of very doubtful value to the owners of property in the congested sections of large cities. The organization of Lloyd's may be illustrated by the following statement of the "Assurance Lloyds of America'' required by the insurance commissioner of New York and published in his annual report:

ASSURANCE LLOYDS OF AMERICA
(Formed and commenced February 15, 1892.)
Frank M. Parker, Attorney. Charles E. Hill, Secretary.

Underwriters Composing Association

Name and Address. #.

ssurned.

Victor A. Harder, 128–132 White Street, New York City...
P. J. Carlin, 26 Court Street, Brooklyn, N. Y.............. 5
Charles H. Simmons, 110 Centre Street, New York City... 5
W. H. Loomis, Williamsport, Pa........................... 5
Charles T. Dotter, 30–32 Barclay Street, New York City... 5
Thomas Nelson, Jr., New Brunswick, N. J................. 5
Charles E. Hill, 141 Broadway, New York City............ 5
Frank M. Parker, 58 William Street, New York City...... 5
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Augustine Banks, 34 New Street, New York City.........
J. Ross Valentine, M.D., Woodbridge, N. J................
Edward G. Benedict, 68 Wall Street, New York City......
C. L. Rickerson, Pier 43, North River, New York City....
John J. Roberts, 1123 Broadway, New York City..........
Colbert C. Brown, 1123 Broadway, New York City........
Stephen M. Wright, Plainfield, N. J.......................

(Here follows the financial statement.)

Owing partly to the fact that these organizations lack all the qualities which are regarded as constituting the financial strength of the stock fire-insurance companies, and partly to their very unsatisfactory record, many states have enacted special legislation for the protection of their patrons. In Pennsylvania these organizations are prohibited, and in some ten states they are required to make a cash deposit as security for the protection of policy-holders. Especially is this desirable, since the policies of these partnerships are insured by agents who represent all the partners and are not acquainted with the financial resources and business affairs of the several individuals. In the remaining states there is either no law at all governing this form of underwriting, or it is subject to the same requirements that apply to other insurance companies, t

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