3. Remarks and observations on the selection of risks . 

 Demonstrating that Insurance has probably Increased the hazeord 

 is emother way of explaining why the loss experience of the 

 msijorlty of Insurers has been unprofitable and the cost of 

 insurance high. The proposition is also in line with the pre- 

 vious discussion in Chapter II on the importance of the owner's 

 expectations leading to his decision to carry or not to carry 

 insurance on his vessel. On the other hand, the fact that 

 insurance probably has increased the hazard does not exclude 

 the likelihood of adverse selection of risks among vessels by 

 individual insurers in the first place. The cynical remarks of 

 a noninsured owner from the Gulf Area amply illustrate the point: 

 "I am not planning to burn my boat; why should I Insure it?" 

 Equally indicative are the remarks of a noninsured New Englander: 

 "The fellows who do go to court are all on insured vessels, and 

 the owner says: 'I pay plenty for insurance. Go eihead and col- 

 lect what you can. The insurance company is paying the bill.*" 



Besides showing a probable increase in hazard and adverse 

 selection, the loss experience rating and the ratios are useful 

 tools of analysis in another respect. They Indicate the vessel 

 characteristics which are associated with a satisfactory or 

 unsatisfactory loss record. 



It will be noted, for example, that Rockland and Portland, 

 Maine, and New London, Connecticut had relatively favorable loss 

 experience ratios (more than 1.0 ), while most Massachusetts ports 

 had relatively unfavorable ratios (leer; than l.O) for both hull 

 and protection and indemnity Insurance (table 20). The port of 

 Boston was an exception with relatively favorable hull insurance 

 loss experience ratio but with a relatively imfavorable protec- 

 tion and indemnity ratio. The Boston hull experience may be 

 partly explained by the fact that a disproportionate number of 

 insured active steel hull vessels operate from that port. 

 Commensurably, the relatively unfavorable protection and indemnity 

 insurance experience may be attributed largely to the fact that 

 all large insured steel vessels in the New England sample with 

 depersonalized relations between owner and crew had Boston as the 

 port of their operations. It is not mere coincidence that Boston 

 and New Bedford, which are considered Important centers of union 

 activities, were also the only ports with unfavorable protection 

 and indemnity insurance loss experience ratio. Gloucester, the 

 third center of organized labor In New England, might have shown 

 unfavorable experience ratio had it not been for the likelihood 

 that the Gloucester sample Includes a considerable n\imber of 

 vessels operated by kinship groups. Similar observations may 

 be made for the Gulf Area and California from the ratios of 

 table 20. 



95 



