UNITED STATES - INSURANCE AND THRIFT 



hazard into its component parts. The schedtale gives a Hst of the conditions 

 for which an inspector should look, diminishing the probability that he 

 will overlook defects or good points. A combination of judgements was 

 obtained in determining the charges to be made for the particular risks dis- 

 tinguished b}'^ the analysis. It might at least be expected that a smaller 

 percentage of error would be present under such conditions than in the un- 

 aided estimate of any individual inspector. 



The modern era of schedule rating may be said to begin with the pub- 

 lication in 1893 of the Universal Mercantile Schedule, an attempt to devise 

 a system of rating universally applicable and to render special schedules 

 unnecessary. This schedule starts from a basis rate for a " standard " 

 building in a " standard " city, such rate being 25 cents for every $100 of 

 insurance. To decide what the rate shoidd be on a standard building in a 

 given city this city is compared with the standard city. In order to find the 

 rate for a given building its construction, occupancy and exposure must 

 also be considered. The second important universal schedule, the Ana- 

 lytic, presented a better formulated analysis of hazard. But both these 

 schedules made practically no attempt to justify their results by statistics. 

 An insistent demand at the Annual Convention of Insurance Commissioners 

 that such neglect should be remedied resulted in the establishment b}^ the 

 National Board of Fire Underwriters of an actuarial bureau to ascertain 

 fire loss costs. Subsequently two new schedules were devised, one combin- 

 ing some features of the Universal and the Analytic, the other designed to 

 make use of the data collected by the foresaid actuarial bureau. The for- 

 mer, the L. S- L. Schedule, or I^arter and I^emmon Rating System, has in 

 particular two new features : it lays stress on the " burning degree " or 

 degree of inflammability and on the influence of floor resistance. The 

 E. G. R. Schedule, or Experience Grading and Rating Schedule, is an attempt 

 to devise a method of ascertaining the total cost of insuring risks of varying 

 character by an analysis of statistics of past experience. The method of 

 procedure is : i) to ascertaiti the ratio of losses, expenses and a fair profit, to 

 the insurance written on all risks in the United States ; 2) to obtain a similar 

 ratio for the average risk in each particular State ; 3) to ascertain the ave- 

 rage United States' rate on a risk of a specific class. The danger of inade- 

 quate data as a basis for premiums is thus immensely reduced, while the 

 risks in every State are rated in accordance with its particular experience. 

 The E. G. R. schedule is plainly an endeavour, however successful or un- 

 successful its results may be, to meet fairly the objections of critics to 

 existing methods of measuring hazard. 



A few words may be said as to the collection of the data necessary to 

 its application. On i January 1915 a standard classification was adopted 

 and the actuarial bureau of the National Board of Fire Underwriters began 

 a collection of experience from almost 190 companies, nearly one third of 

 which were nmtual societies and not members of the National Board. 

 The board's work has been much furthered by the co-operation of the insu- 

 rance departments of a number of States. In May 1916, 236 companies 

 were co-operating in the work, including 125 National Board companies, 



