i6 



HARDWOOD RECORD 



the Boyiie City Board of Trade ; president of 

 the Beulah Farm for Boys at Boyne City ; an 

 active member of the Methodist Episcopal 

 church, on its official board, and active in 

 planning its business affairs. 



His beautiful home in Boyne City is always 

 hospitably open to his friends, who also 

 know that if they are numbered in that 

 charmed circle they have also reached the 

 heart of a man who is noted for his loyalty. 

 Many times in his business career Mr. "White 



lias met with reverses that would have felled 

 ;i weaker man, but William H. Wh'te has 

 seemed to know one thing thoroughly — he 

 makes up his mind what he wants and then 

 he gets it. There is no compromise or devia- 

 tion, no discouragement can overcome his pur- 

 pose. He drives a close bargain, but after 

 the deal is closed he sticks to it whether the 

 market is for or against him. His word is 

 his strongest asset, and it never shrinks in 

 value. 



Mutual Lumber Fire Insurance. 



[This paper was read before the National Wholesale Lumber Dealers' Association's 

 thirteenth annual meeting, by Justin Peters, who is manager of the Pennsylvania Lum- 

 bermen'.s Mutual Fire In.surancc Company of Philadelphia. Mr. Peters is ode of tbo 

 foremost aiuhorities on the subject treated.] 



Mutual fire insurance is the best and safest 

 tire insurance ontainable. That this is true 

 I purpose to unquestionably prove. In prov- 

 ing the above I speak solely for the mutual 

 principle. I purposely refrain from indors- 

 ing any particular company, although I in- 

 dorse all good lumber mutuals. 



Fire insurance is a business arrangement 

 for distributing the losses of the few among 

 the many. Stock and mutual companies both 

 accomplish this, but by different plans. 

 Which is the better plan? Experience has 

 demonstrated most emphatically that the mu- 

 tual plan is incomparably better for the 

 property owner than the stock company plan. 

 Why? Because more secure indemnity is fur- 

 nished and at a minimum of cost. The stock 

 company plan furnishes imlemnity less secure 

 than the mutual plan and at a maximum of 

 cost. 



The indemnity of the mutuals is more se- 

 cure because there is relatively greater finan- 

 cial strength back of each policy than there 

 is back of the policies of the stock companies. 

 When the board stock companies boast that 

 their policy-holders run no risk of as.sess- 

 ment they boast of their own weakness. In 

 event of extraordinary losses the lumber mu- 

 tuals possess, solely as a final reserve, the 

 power to assess every policy-holder. The 

 stock companies do not possess such power, 

 and with similar extraordinary losses, de- 

 fault on their contracts. After the Baltinuire 

 fire, eleven stock companies went into re- 

 ceivers' hands. There are seventeen cities in 

 the United States with recognized congested 

 districts. If any one of the congested dis- 

 tricts in these seventeen cities were to be 

 wiped out by a conflagration the policies of 

 over 90 per cent of the board stock compa- 

 nies on your lumber risks would be worthless. 

 The lumber nmtuals run no such risks of 

 sweeping conflagrations, because their haz- 

 ards are scattered outside of, and remote 

 from, such congested districts. 



Each policy-holder assumes a small, limited 

 liability, which is restricted usually to three 

 tinjes the annual premium paid. In other 

 words each policy-holder agrees if exceptional 

 calamities render the cash annual premium 

 paid insufficient to pay losses and expenses 



that he will pay his proportionate part of 

 the additional amount required, and in prop- 

 erly managed mutual companies experieneo has 

 shown that the premiums are more than ade- 

 quate to provide for losses and expenses. As 

 a result there is more reason to expect that 

 the old line companies will default on their 

 policies than that any of the policy-holders in 

 the lumber mutuals will Ije called upon to pay 

 any assessment. However, do not forget that 

 your trade mutuals have already paid back 

 to their policy-holders sufficient dividends 

 upon the insurance they have written to more 

 than offset any assessment which might j)ossi- 

 bly arise from this most remote calamity. 



Xo business is so poor but that some people 

 iimke money out of it, and no business so 

 good but that some people fail at it. Con- 

 sequently, lumbermen must of necessity, when 

 purchasing insurance, exercise discretion in 

 the acceptance of policies, whether they be 

 stock or mutuals. It would be as unwise to 

 indorse all mutual companies as it is unwise 

 to indorse all stock companies, but mutual 

 fire insurance companies that confine their 

 operations to good lumber risks, under good 

 management, cannot be too strongly indorsed. 



To determine the qualitv of the indemnity, 

 the manner in which the nuitu:il anil stock 

 I'onipanies settle losses must be compared. 

 In your lumber trade any buyer of lumber 

 who makes unjust claims is listed as a 

 ' ' kicker. ' ' Ninety per cent of the board 

 stock companies are "kickers" when it comes 

 to settling a loss. The mutuals settle prompt- 

 ly and fairly. If your Bureau of Informa- 

 tion were to investigate the paying methods 

 of the stock companies they would have a 

 large number of names added to list "A." 



What is the tire insurance cost under these 

 two plans? Under the mutual lumber plan 

 it consists only of two factors, i. e., fire 

 losses of the lumber trade only an^. reason- 

 able management expense. The benefit of all 

 excess premiums goes to the policy-holders 

 only. Under the stock company plan, the 

 cost is not BO limited, and it consists of a 

 tire loss ratio burdeneil with losses in other 

 and more dangerous trades, a management 

 expen.se, including agents' and brokers' com- 

 missions (wliii-li alone consume from 20 to 



30 per cent of the premiums), and finally, a 

 profit for the stockholders. 



The fire loss ratio is less in the lumber 

 nmtuals than in the board stock companies 

 for several reasons. The moral hazard is 

 greatly reduced because the lumber mutuals 

 exercise much greater care in the acceptance 

 of risks. The agents and brokers indorse 

 ami secure the acceptance of bad risks in 

 sto:'k companies as otherwise they lose their 

 commissions. The worse the risk the higher 

 the premium and the greater the commission. 

 Inspections, as made by mutuals, are nuire 

 careful and better than those made by the 

 stock companies, because they are specialists, 

 and the mutuals thereby escape many losses 

 that are suffered by the board stock compa- 

 nies. Innumerable bad risks refused by the 

 lumber mutuals are freely written by the 

 board companies. Furthermore, the board 

 stock companies suffer a much heavier loss 

 ratio in many other lines of trade than they 

 do in the lumber trade, and they endeavor to 

 make good these excess losses by raising the 

 rates on lumber. 



The extravagant expenses of the boanl 

 stock comjianies are notorious. The lumber 

 mutuals arc managed economically. 



Profits in a mutual company are paid to 

 the policy-holders. Consequently, there is no 

 reason for collecting exorbitant rates. The 

 board stock companies seek every excuse tor 

 advancing rates, and by the formation of a 

 trust prevent competition among themselves, 

 all to the end that the stockholders' profits 

 may be increased. Statements and figures 

 are incessantly issued to show that the board 

 stock companies are losing money. That 

 these statements are false is shown con- 

 clusively by their large dividends, by their 

 ailditions to surplus and by the increases 

 made in the values of the shales of their 

 stock. 



Joint stock companies remind one of nest 

 cnrgs. No matter how long the hen sets on 

 the porcelain, nothing comes out of it. No 

 matter how many years you pay premiums 

 vou get nothing back unless you have a fire. 

 This is not the case with the himber mutuals. 



When mutual lumber companies were organ- 

 ized the agents of the boanl stock compa- 

 nies predicted that they would speedily fail. 

 Were these predictions honest or dishonest? 

 If we assume that thev were honest, by 

 these false predictions thev demonstrate their 

 lack of the knowledge of the fire insurance 

 business. If they were dishonest, they were 

 then en<leavoring to crush competition. The 

 lumber mutuals have |)rovcd their case by the 

 reduction in rates which they have made, oy 

 the dividends which they have paid and by 

 the safety reserves which they have accumu- 

 lated. And today the antagonistic state- 

 ments which are made by the board stock 

 companies to retard the progress of these 

 mutual lumber companies, must .be attributed 

 to the same iL'norancc or the same dishonesty. 



These falsehoods uttered by the agent,s of 

 board stock companies have deterred many 

 lumbermen from taking mutual policies. Such 



