making insurance protection costlier. In still other instances the 

 reverse may have been true. Insurance contracts are negotiated and 

 become effective on any day during a calendar year so that policies 

 which become effective during the second half of each calendar year 

 expired during the first half of the following yeeir. Thus, averaging 

 of the gross premixaas on the basis of the effective calendar year may 

 have had ejx effect similar to a moving average by raising the avereige 

 gross premium in the first half of 1950 and lowering it in the second 

 half of 195^. These considerations and field work experiences lead 

 us to believe that the burden of the rising premium was distributed 

 quite xinevenly among insured vessel owners and that the experience of 

 vessel O'tmers in each area may have been worse than is shown by the 

 sample . 



2. The cost of insurance in terms of coverage . The cost of 

 hull insurance increased daring the five-year period under study, 

 not only because of the rise in premium, but also because of the 

 reduction of coverage the owner received from the insurer in all 

 three geographical areas. 



First, let us refer to the coverage index, i.e., the ratio of 

 gross premium divided by the amount of insurance, shown as item 2 

 in table $. This index is a more accurate measure and a better 

 base of comparison between the three areas than the insurance rate 

 because it gives equal weight to the absolute amounts of premiiam 

 and insurance. While the owner was paying an increasingly higher 

 premium, at the same time he was buying a decreasingly smaller 

 amount of insurance. On the avereige, a New England owner paid 

 ^kkl premium for $10,000 of insurance protection in 1950-51. For 

 the same amount of insurance he had to pay $510 in 195^-55- In the 

 Gulf this rise in the cost of insurance was less pronounced. The 

 required premium for $10,000 of insurance rose from $51? to $530 

 over the five-yesir period. The California average index rose 

 nesLTly as much as the index in New England with a rise in premium 

 from $634 to $716 for $10,000 of hull insvirance. 



A second measure indicating the rising cost of insurance coverage 

 is observed in the provisions of the franchise and the deductible 

 average clauses. (See Glossary of Technical Terms). During the five- 

 year period the percentage of policies with a franchise clause declined 

 in New England and California while the percentage of policies with a 

 deductible average clause rose. (Table A-29 in Appendix A). Since a 

 franchise clause is a more liberal provision than a deductible clause, 

 this development presumably indicates a tightening of the contractual 

 terms, no t\d.ths tending a slight liberalization of terms of the 

 deductible average clause indicated by an increase in the percentage 

 of policies with deductible providing more exceptions. No indication 

 of a similar development exists in the Gulf Area since no policies 

 with a franchise clause were found in the sample. But in the Gulf, 



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