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ond credit ratings) and $75 per $1,000 for the "combination" policy which, besides covering first and second ratings, also includes inferior ratings. According to the literature of the largest company the minimum size of the policy suggested for various volumes of sales is as follows:

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The several restrictions explained in the foregoing pages

are represented in the policy as follows:

"In consideration of the payment of the premium of... dollars, the....... ...Company insures John Doe against

actual loss to an amount not exceeding..

...dollars, in

excess of an initial or own loss to be first borne by the insured, being. ..per cent (but not less than $.. ..) of the insured's total gross sales and deliveries made between.. day of..........191..and the..........day of..........191.., both days inclusive. Such loss to occur from the insolvency of debtors, as herein defined, between the.... ..day of...... .191..and .191.., both days inclusive, pro

...day of..

the...... vided the corporation shall have received notice of insolvency from the guaranteed, on the form and within the period of time hereinafter specified."

SECTION I. COVERAGE: No loss is covered under this policy, unless the debtor had at the time of shipment a capital rating in one of the accompanying credit ratings specified below, in the latest published book of the....... .Mercantile Agency; and the ratings in such book are to govern all shipments made from the first day of the month borne by said book to the first day

of the month borne by the next subsequent book. The gross amount covered on any one debtor at the date of insolvency shall be limited to... .per cent of the lowest amount of his cap

ital rating, where a first credit rating follows, but shall also be limited to $...... .gross; and shall be limited to.... per cent of the lowest amount of his capital rating, where the second credit rating follows, but shall also be limited to $...... gross.

6. Definition of Insolvency.-Credit-insurance policies also provide that the only losses covered are through debtors becoming insolvent during the term of the policy and in the manner defined, provided notice of such insolvency is furnished during the term of the contract and within twenty days after knowledge of such insolvency is acquired by the insured, or "within fifteen days after the expiration of the contract in case the insured does not receive knowledge of such insolvency in time to comply with the aforesaid condition."

In view of these statements, it is important that the company should carefully define the meaning of the term insolvency. Every policy does this in detail, and the definition generally given is the following:

"Insolvency under this contract is defined to mean: the filing, by or against a debtor, of a petition in bankruptcy or insolvency, under the laws of the United States or of any of the States or Territories thereof, or Canada; the making of an assignment or the execution of a deed of trust or chattel mortgage by the debtor on his stock in trade for the benefit of creditors in general; the sale of the debtor's stock in trade under a writ of execution or attachment; the return unsatisfied of a writ of execution or attachment in favor of the guaranteed or any other creditor; a compromise by the debtor, with a majority, in number and amount, of his creditors; the appointment of a receiver where insolvency is alleged in the application therefor; the appointment of a receiver where insolvency is not so alleged, provided the hereinafter required proof of claim is accompanied by a report of the receiver or by a certified copy of decree of Court showing that

insolvency exists; the absconding of the debtor or the sale or transfer in bulk by the debtor of his stock in trade, provided the hereinafter required proof of claim is accompanied by a report of any mercantile agency or attorney in active practice in the county where the debtor did business, certifying that such account is not collectible, by law or otherwise; the death or insanity of a sole debtor, provided the hereinafter required proof of claim is accompanied by a report of the debtor's executor, administrator, or guardian, or by a certified copy of judgment or decree of Court showing that the estate is insufficient to pay the debts in full; the accounts of debtors who owe the guaranteed not more than $150, and who have ceased to do business, provided the notice of insolvency is accompanied by the report of any mercantile agency or attorney in active practice in the county where the debtor did business, certifying that such account is not collectible by law or otherwise; any judicial determination that the debtor's assets are insufficient to pay his debts in full."

Salvage. There has been much discussion during the last few years concerning the wisdom of creating a salvage department in the field of credit insurance. In fire insurance more and more emphasis is placed upon "fire prevention, "with a view to reducing the enormous annual waste. In employers' liability insurance, steam-boiler insurance, and corporate suretyship, the companies aim to reduce losses to a minimum through a system of stringent supervision and inspection, and a very considerable part of their premium income is expended for this purpose. All appreciate that little good is accomplished directly by merely underwriting risks and paying losses as they occur. But insurance companies can render the business community an invaluable service by devoting their information and highly developed organization to the creation of ways and means which will reduce the sum total of loss. Indeed, it is well recognized that more can be made by charging low premiums, and seeing to it that there are fewer losses, than by charging high premiums and paying the larger losses that result from careless and uncontrolled conduct in business.

Unlike other leading forms of insurance, credit insurance has not yet been used to an appreciable extent as a means of preventing loss. And yet the loss of several hundred million dollars of credit annually through insolvency shows that there is a field here in which credit insurance can render a very useful service. Credit insurance should have for its purpose not merely the payment of losses, but also the control of all accounts that have failed or are about to fail. Through its efficient organization the credit-insurance company could administer insolvent estates at a greatly reduced

It would be to its interest to prevent the heavy losses so frequently resulting from bankrupt sales by seeing that the stock of an insolvent concern is sold at the highest possible price. Its efficiency in handling doubtful accounts might also save many an embarrassed business from going under. And where the business fails, its prompt and intelligent action would certainly result in a reduction in loss as compared with the loss resulting from disconcerted action of creditors when acting individually.

At present credit-insurance companies place the entire burden of proof of loss upon the insured. The policy expressly provides that the insured shall endeavor to obtain all amounts possible on covered insolvent accounts, and shall use due diligence in the filing of claims with referees in bankruptcy, receivers, assignees, or other proper officers for the purpose of having such claims allowed. Because of this provision and also because of the further provision in the policy that proofs of claim must be furnished to the company "within thirty days after the expiration of this contract, otherwise there shall be no liability under this contract," it is sometimes impossible for the policy-holder to obtain proof as required.

In contrast to this method, one company, The London Guarantee and Accident Company, has recently introduced into its policy an agreement which it terms the "Guaran

teed collection service." Under the definition of "insolvency," this company considers as proven any loss on any account covered by the limits of the policy which is not collected by the salvage department within a specified time after it has been placed for collection. This time is usually limited to sixty days. The salvage department will also take accounts which are not covered by the terms of the policy; that is to say, the company is willing that the policy-holders should use its service on all occasions. For this collection service, the usual collection fees are charged. In this way the insurance company offers cooperation and protection to the policy-holder before an account is actually lost, and prevents the insured's losses from exceeding the initial loss, thus protecting itself from the payment of claims. On the other hand, it may prevent the losses from reaching the initial loss, thus benefiting the policy-holder. By reducing the initial loss, there would in due course of time also result a decrease in the size of the policy required and the premium charged.

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