24 UNITED STATES - INSURANCE AND THRIFT 



to alienate members who have suffered a partial loss by pointing out to them 

 that another company would have paid them a greater indemnity. 



The liability of the insured L either limited or unlimited. When it is 

 unlimited a member of an insuring company binds himself to pay his pro 

 Y ata share of all the company's losses and legitimate expenses. Many per- 

 sons have objected to this position although it is that imposed by about 

 seven tenths of the successful companies. It is argued that the apparently 

 impossible might come to pass, that a company might experience so many 

 and such hea\-y losses that the consequent assessments would cause members 

 who had not suffered loss by fire to go bankrupt. In fact however, when a 

 farmers' mutual company takes a reasonable number of losses on separate 

 farms, an^-thing corresponding to a loss by conflagration is inconceivable. 

 To this the only exception seems to be the case of a frontier community in 

 which extensive prairie or forest fires are still possible. 



Both the company and the insured should have the option of cancelling 

 a policy. When it is cancelled on the initiative of the insured it is reasona- 

 ble to charge him a short-term rate higher than the pro rata cost for the 

 whole term of his polic}^ After such short-term rate has been deducted 

 the balance of any advance charges he has paid should be returned to him. 

 When however a policy is cancelled on the initiative of the company only, 

 the pro rata cost of insurance for the time for wlych protection has been 

 given should be deducted from any advance pa^^ments returned to the in- 

 sured. 



A reasonable jiolicy or membership fee should be provided for in the by- 

 laws. This fee is usually large enough at least to pay the representative of 

 a company who receives applications and surveys risks. 



Apparently many farmers' mutual companies at first levied assessments 

 after each loss had been incurred and a few still adhere to this plan. It 

 has however been found to be, in the case of fair-sized companies, needlessly 

 burdensome to ofiicers and needlessly expensive in that it necessitates 

 repeated notifications and receipts to members. The members often find 

 several calls on them in one year for small assessments to be troublesome. 

 Other companies follow the plan of borrowing money with which to pay for 

 losses as they occur, and levying at the end of a business year an assessment 

 sufficient to pay the debt. An increasing number of the companies are 

 however adopting the plan of requiring the prepayment of an initial premiam 

 at least equal to one 3^ear's average cost, and collecting at the beginning of 

 each succeeding year for which the policy lasts an annual assessment in 

 advance. vShould it be found that funds have become exhausted some time 

 before the next regular assessment is due, the management should not hesi- 

 tate to make good the deficiency by levying a special assessment. It 

 is important that the payment of all dues should be enforced in a business- 

 like manner. Several companies have lost credit, and therefore members, 

 because of their failure to levy assessments promptly and eftectively. 



With relatively few exceptions the farmers' mutual fire insurance 

 companies in the United States have hitherto charged the same rate for 

 all classes of farm property. There has been little material fci a classifi- 



