THK ORCtANIZATION OP FARMERS MUTUAL FIRE INSURANCE COMPANIES 23 



A difference of opinion exists as to the term of years for which a policy 

 should he written. A small numl>er of the farmers' nuitual companies 

 make their jiolicies ])erpetual in form ; and it is claimed that permanence 

 is thus giN-en to a company and the expense incident to renewals saved. 

 But the value of a given farm risk changes with the addition of new and the 

 deterioration of old buildings and the increase or decrease of stock and ma- 

 cliinery, and therefore a ])olicy usually requires from time to time such 

 changes as make it in effect a new contract. There is also a danger that if 

 there be no specific termination of a policy, the revaluation of the property 

 concerned will be postponed so unduly as to produce over-insurance, and 

 consequently a bad moral Iiazard. The duratioa of the policies issued by 

 the farmers' mutual companies varies, when it is limited, from one to ten 

 A'ears, but is five years in the case of more than seven tenths of the com- 

 panies. 



It is very important, especially in the case of a new company insuring 

 a comparatively small amount of risks, to limit the amount of insurance 

 written on one building or on a group of buildings exposed to one fire. It 

 is perhaps safe to say that no recently organized company should attempt 

 to write more than §2,000 on a single risk. 



Some provision for sharing liability for the larger risks with one or more 

 other companies should be made, if possible, by every company. Accord- 

 ing to the plan recommended two or more companies issue separate poli- 

 , cies for specified amounts on the same risks, care being taken that the total 

 amount of such ix)licies is well within the value of the insured property. 

 The issuing companies are practically independent of each other ; hence 

 there is no need for t^em to have that uniformity of method or approval of 

 one another's methods which is necessary when one company reinsures 

 another's risks. 



From the point of view of the company the insurance written should 

 be as specific as possible. The practice of writing blanket insurance, that is 

 of allowing a variety of objects to be insured bj- the pa3''ment of a single 

 lump sum, is unfair both to the company and to the members who have a 

 small amount of property to insure. In extreme instances a man has in- 

 sured all his personal property on several separate farms by a single sum of 

 insurance, thus protecting it b}^ a paj^ment equal to 10 or 20 per cent, of 

 its value. A number of the farmers' mutual companies have materially 

 reduced their rate of assessment, and at the same time made assessments 

 more just, simply by changing the plan of giving blanket insurance to that 

 of specifically enumerating and valuing the various kinds of property 

 covered by a contract. 



A few farmers' mutual companies limit their liability for indemnity 

 to three fourths of the value of the property affected, whether the loss be 

 total or partial. Prevailing practice, which requires full indemnit)' up to 

 the amount of the in.surance carried to be paid in the case of partial losses, 

 is however followed in the department's model by-laws; mainly because the 

 more logical plan of three fourths liability runs a risk of incurring unfair 

 competition. It oft'ers an opportunity to agents of competing companies 



