the terms of the contract were already high because almost all 

 policies studied provided for a deductible. Further, the insur- 

 ance coverage was additionally reduced by an increase in the 

 amounts to be deducted. In Nev England there was a steady and 

 considerable rise in the average amount deducted under franchise 

 and deductible clauses. The deductible amount rose also in the 

 other two areas, while there was a slight decline of the franchise 

 amount in California. 



In New England a decline in the percentage of policies with 

 full coverage under the Inchmaree clause (see Glossary of Techni- 

 cal Terms) from 72 percent to 26 percent, although desirable in 

 other respects, is another indication of the rising insurance cost 

 in that area. A slight increase in the percentage is evidenced in 

 the Gulf Area, indicating some increase in the coverage. In terms 

 of full coverage under the Inchmaree clause, protection is quite 

 liberal in California, since all policies studied carried the pro- 

 vision. The percentage of policies with exclusions on loss of 

 equipment remained fairly constant throughout the period in «.n 

 three areas, indicating no substantial change in the coverage with 

 regard to this provision (table 9)- 



To translate all contractual provisions related to coverage 

 in quantitative terms is impossible. But after considering all 

 available information, the conclusion is reached that the reduc- 

 tion in coverage may have contributed as much to higher insurance 

 costs as the rise in premium, if not more. 



3. Comparison of insuran ce cost between geographical areas . 

 It is important to notice that the average gross premium for the 

 five-year period was $6,551 in California, moi'e than twice the 

 $2,^30 New England average and almost six times as large as the 

 $1,111 in the Gulf Area (table 9)- Tliese differences are partly 

 explained by the differences in the average size of vessel and 

 operations in each area. In terms of both gross tonnage and mar- 

 ket value of insured vessels the Gulf Area vessels are on the 

 average about kO percent and the Ne\/ England vessels about 60 

 percent the size of California vessels (tables A-2 and A-26 in 

 Appendix A) . If premium differential between the areas was due 

 entirely to vessel size, then the average insurance rate should 

 have been the lowest in California and the highest in the Gulf 

 Area because within each area insurance rates are inversely re- 

 lated to vessel size. (See table 27). Actually the reverse is 

 true. Insurance rates for the last yearly period under study 

 (195^-55) averaged 5-30 percent in the Gulf Area, 6.40 percent 

 in New England, and 7-58 percent in California (tables A-27 in 

 Appendix A) . Assuming that the amount of insurance equals the 

 market value, the number of years required to write off the mairket 

 value of an insured vessel, excluding interest eai'nings, is on the 

 average, about I9 years in the Gulf Area, I6 years in New England, and 



51 



