A- 59 in Appendix A). Tlie effect of age and ^togs tonnage on the 

 premlun ratio can be easily seen in New Engla:id (cf . previous 

 discussion on rating). iUso, the premium ratio of best active 

 wood vessels vas higher than the ratio of vorst active wood 

 vessels in both Gulf Area and California. 



Of course, the out-of-pocket premium which the ovmer of a 

 vessel with worst loss record paid \ras higher than the premium 

 paid by the o-vraer of a vessel with best record. In Hew England 

 the gross premium per policy for best active wood vessels was 

 $1,612, much less than the gross premivim of $2,683 per policy for 

 worst active wood vessels (table A-59 in Appendix A). But it is 

 questionable whether even a small part of this difference can be 

 attributed to factors other than age and gross tonnage differences 

 between the two vessel classes. (Worst vessels were almost t-vrice 

 as large as and sliglitly younger than best vessels--table 27.) 

 There is evidence which substantiates this contention. In the 

 Gulf Area, where no differences in age and gross tonnage between 

 the two vessel classes exist, gross pi-eraium per policy was $1,091 

 for best vessels and only $966 for worst vessels. In California 

 these figures are $5,017 for best and $6,^59 for worst vessels 

 which, at first glance, seems to disprove the above statement. 

 It should not be forgotten, however, that in California worst 

 vessels were slightly larger than best vessels- -lii-5 gross tons 

 for the former as compared to 126 gross tons for the latter- - 

 and that risk differentiation in terms of the premium ratio was 

 better in California than elsewhere . 



In connection with the insurer's efficiency in estimating the 

 expectation of loss, the situation may be summed up as follows: 

 Insurers differentiated between various insurable risks as far as 

 the coverage was concerned. It is questionable, however, whether 

 differentiation in terras of coverage was adequate, especially 

 among active wood vessels. In addition, the coverage differentials 

 were largely offset by the premium ratio, especially between best 

 and worst active vessels. Relatively speaking, insurers failed to 

 differentiate more in terms of the premiiua ratio than in terms of 

 coverage. This is highly significant from the vieirpoint of the 

 effect of insurance practices on the loss experience of insurers 

 because the coverage determined the scope of the insurers' obliga- 

 tion to indemnify the insured, while the premium ratio determined 

 the revenue from which obligations must be paid out. 



h . Rating and cos t in Protec t i on and i ndeiiin i t y insur ance . 

 The expectation of loss in protection and indemnity insurance is 

 estimated on a considerably different basis than the one used in 

 hull insurance. In the last analysis the expectation of loss 

 depends largely on one single criterion--the size of the crew. 



120 



