COINSURANCE ON FIREPROOF BUILDINGS

Rate No. 324 of Universal Schedule

Cents

15..

16.

17.

18.

19.

20.

21

22.

23.

24.

25.

26.

27.

28.

29

30.

35.

40.

45.

50.

55.

60.

65.

70.

75.

80.

85.

90.

95.

100.

Percentage of Insurance to Value.

20% 30% 40% 50% 60% 70% 75% 80% 90% 100%

Cents Cents Cents Cents Cents Cents Cents Cents Cents Cents 12.95 10.35 8.67 7.45 6.52 5.77 5.46 5.16 4.63 4.20 13.81 11.04 9.24 7.95 6.96 6.16 5.82 5.50 4.94 4.48 14.67 11.73 9.82 8.44 7.39 6.54 6.18 5.84 5.25 4.76 15.53 12.42 10.40 8.94 7.83 6.93 6.55 6.19 5.56 5.04 16.39 13.11 10.98 9.44 8.26 7.31 6.91 6.53 5.87 5.32 17.26 13.80 11.56 9.94 8.70 7.70 7.28 6.88 6.18 5.60 18.12 14.49 12.13 10.43 9.13 8.08 7.64 7.22 6.48 5.88 18.98 15.18 12.71 10.93 9.57 8.47 8.00 7.56 6.79 6.16 19.84 15.87 13.29 11.43 10.00 8.85 8.37 7.91 7.10 6.44 20.71 16.56 13.87 11.92 10.44 9.24 8.73 8.25 7.41 6.72 21.57 17.25 14.45 12.42 10.87 9.62 9.10 8.60 7.72 7.00 22.43 17.94 15.02 12.92 11.31 10.01 9.46 8.94 8.03 7.28 23.30 18.63 15.60 13.41 11.74 10.39 9.82 9.28 8.34 7.56 24.16 19.32 16.18 13.91 12.18 10.78 10.19 9.63 8.65 7.84 25.02 20.01 16.76 14.41 12.61 11.16 10.55 9.97 8.96 8.12 25.89 20.70 17.34 14.91 13.05 11.55 10.92 10.32 9.27 8.40 30.20 24.15 20.23 17.39 15.22 13.47 12.74 12.04 10.81 9.80 34.52 27.60 23.12 19.88 17.40 15.40 14.56 13.76 12.36 11.20 38.83 31.05 26.01 22.36 19.57 17.32 16.38 15.48 13.90 12.60 43.15 34.50 28.90 24.85 21.75 19.25 18.20 17.20 15.45 14.00 47.46 37.95 31.79 27.33 23.92 21.17 20.02 18.92 16.99 15.40 51.78 41.40 34.68 29.82 26.10 23.10 21.84 20.64 18.54 16.80 56.09 44.85 37.57 32.30 28.27 25.02 23.66 22.36 20.08 18.20 60.41 48.30 40.46 34.79 30.45 26.95 25.48 24.08 21.63 19.60 64.71 51.75 43.35 37.26 32.61 28.86 27.30 25.80 23.17 21.00 69.04 55.20 46.24 39.76 34.80 30.80 29.12 27.52 24.72 22.40 73.35 58.65 49.13 42.24 36.97 32.72 30.94 29.24 26.26 23.80 77.67 62.10 52.02 44.73 39.15 34.65 32.76 30.96 27.81 25.20 81.98 65.55 54.91 47.21 41.32 36.57 34.58 32.68 29.35 26.60 86.30 69.00 57.80 49.70 43.50 38.50 36.40 34.40 30.90 28.00

N. B.--For any intermediate rate, combine two of above; for example, the rate of 31 cents would be that for 15 cents and 16 added; the rate for 32 would be double that for 16.

If the rate, as found by the schedule, is 15 cents per hundred dollars of insurance, this means that the flat rate of 15 cents is to be charged if only 15 per cent of the value is insured. But let us assume that 20 per cent of the value of the building

is insured. In that case we saw from the preceding table that the rate is to be 86.3 per cent of the flat rate instead of the full rate, or 100 per cent. But 86.3 per cent of 15 cents is 12.95 cents, and that is the figure which will be found in the column under the 20-per-cent heading and opposite the 15-per-cent rate. Suppose that with the flat rate being 15 cents the policy-holder agrees to insure the building to 30 per cent of its value. In the preceding table we noticed that if 30 per cent of the value of the building is insured the rate shall be only 69 per cent as large as if only 15 per cent of the building were insured. Sixty-nine per cent of 15 cents is 10.35 cents, which is the amount which will be found opposite the fifteen cents rate and in the 30-per-cent column. The same explanation might be given for any rate found by the schedule and for any amount of insurance that might be taken out. Thus, for example, if the rate found by the schedule is 28 cents, this rate is the rate which is to be charged if only 15 per cent of the value of the building is insured, that is to say, 100 per cent of the rate is charged if the insurance amounts to only 15 per cent of the value of the building. Suppose, however, that the owner of the building agrees to insure 50 per cent of the building. The preceding table shows that if 50 per cent of the value is insured, the rate should be only 49.7 per cent of the rate charged if only 15 per cent of the value is insured, that is to say, 49.7 per cent of 28 cents, or 13.91 cents. This is the amount which will be found in the 50-per-cent column opposite the 28-cent rate.

The Three-Quarters Loss and Value Clauses.-It should be noted that fire-insurance policies frequently contain a clause which limits the insurer's liability to a fixed proportion, such as two thirds or three fourths of the loss, or of the value of the property insured. In cities with good fire protection, it is the desire of the company to prevent the insured from taking out too little insurance. On the other hand, in communities where the fire-protection facilities are poor,

and where losses are apt to be total rather than partial, or in the case of properties which may at any time become unprotected, or which are dangerous risks, it is the desire of the company to assure itself of the owner's interest in safeguarding the property by preventing him from taking out too much insurance. Thus, if a building is valued at $10,000 at the time of the fire, and is insured under an $8,000 policy containing a "three-fourths loss clause," and the loss amounts to $8,000, then the company's liability is limited to three fourths of $8,000, or $6,000. If, however, this $8,000 policy contained a "three-fourths value clause," the company's liability would be three fourths of $10,000, or $7,500. The following two clauses are given as typical examples of the "three-fourths" clause:

THREE-FOURTHS VALUE CLAUSE

It is a condition of this insurance that, in the event of loss or damage by fire to the property insured under this policy, this company shall not be liable for an amount greater than three fourths of the actual cash value of each item of property insured by this policy (not exceeding the amount insured on each such item) at the time immediately preceding such loss or damage; and in the event of additional insurance-if any is permitted hereon-then this company shall be liable for its pro rata proportion only of three fourths such cash value of each item insured at the time of the fire, not exceeding the amount insured on each such item. Attached to and made a part of Policy No. Insurance Company.

THREE-FOURTHS LOSS CLAUSE

of

It is a condition of this insurance that, in the event of loss under this policy, this company shall not be liable for an amount greater than three fourths of such loss (not exceeding the sum hereby insured), and in the event of additional insurance permitted hereon, then this company shall not be liable for an amount greater than its pro rata proportion of three fourths of such loss; in both events the other one fourth to be borne by the assured. Attached to and made a part of Policy No.

Insurance Company.

of

Many believe that the supposed benefits of a seventy-fiveper-cent limit of insurance to value or loss are greatly exaggerated, and doubt its efficacy in the case of movable property. In this class of property it is frequently impossible to estimate correctly the value of stocks in sealed barrels, boxes, bottles, or packages, and while a dishonest owner may receive but three fourths of his dishonest claim, this three fourths of the loss may greatly exceed the entire value of the stock. In the case of buildings, however, which can be correctly valued, the owner should have a one-fourth interest in their protection, and the three-fourths clause may here serve a useful purpose.

CHAPTER XVI

FIRE-INSURANCE RATING

THE fire waste in the United States averages annually about $200,000,000. This huge sum is gone forever, and cannot be replaced through insurance or any other means. Fire insurance is not directly productive, but the good it produces is purely negative in character. Its sole object is to distribute among all members of the community those losses through fire sustained by the individual, and its cost must therefore be regarded in the nature of a tax assessed against the many for the benefit of the unfortunate few. It is the task of fire-insurance companies to equitably assess, collect, and distribute this tax.

In all ages the task of the tax gatherer has been an unpleasant one, and the work of properly assessing taxes has always been one of the most difficult problems of government. The fire tax is no exception to this rule. Against its assessors and collectors-the insurance companies-there has been directed for years a vast amount of unfriendly criticism. Just as with other taxes, there is a constant endeavor to lessen the individual burden without, however, lessening the actual fire waste. So many factors, however, enter into the making of the fire rate, and so little does the average property owner understand why he is charged a certain sum, that the whole subject of "fire rating" has come to be regarded by the public as shrouded in mystery, marked by inconsistencies, and indeed as little more than pure guess work. Whenever many independent companies are seen to charge the same rate for the same class of risks, it is only

,