In California, it is quite clear that the cost of insurance of 

 vessels with worst record vas lover than the cost of best vessels. 

 The owner of a vessel with worst loss record paid ^23 per $10,000 of 

 insurance, while the o^mer of a vessel with best loss record paid 

 $33 for the same amount of insurance . In addition, although coverage 

 was equally liberal in all respects for both classes of vessels, the 

 deductible amount of $570 on personal injuries for worst vessels 

 indicates a greater coverage than the amount of $730 for best 

 vessels. This serious discrepancy may be explained by the method 

 with which the expectation of loss is determined in California. Since 

 this method does not use crew size as a basic criterion, it is less 

 likely to take into consideration loss experience and therefore, the 

 probability of loss. Rather, it seems to rely heavily on the amount 

 of insurance at stake. This in turn may partly explain the relatively 

 more unprofitable experience of insurers in California than in New 

 England. 



Failure of insurers to differentiate between best and worst 

 vessels is more pronounced in protection and indemnity insurance 

 than in hull insuraxice, a fact indicated by the wide difference in 

 the loss ratio between best and worst vessels. Daring 1950-5^ the 

 loss ratio of best vessels in New England was as low as 3'1 vhile 

 no losses from best vessels were reported in California. By com- 

 parison, the loss ratio of worst vessels in New England was 111.5 

 and in California, 331-9 (table l8). 



Were insurers as a gi'oup efficient in accurately estimating 

 the expectation of loss on. hull and protection and indemnity 

 insurance? The answer to this question depends largely on one's 

 viewpoint or the definition of the situation and whether insurers 

 were efficient or not is a matter of degree rather than of 

 complete lack of efficient rating. 



From the vievrpoint of operational efficiency the above findings 

 Indicate the presence of a number of imperfections in the rating 

 process. Why did insurers fail to differentiate more than they did, 

 especially in terms of the premium ratio which determines their 

 revenue? This question is part of another more general one. Why 

 was loss experience unprofitable for a majority of insurers during 

 1950-5^^? 



In the course of this survey, a considerable amount of informa- 

 tion was accumulated on insurance practices and the structure of the 

 insurance industry. This subject, however, is a study in itself 

 lying outside the limited scope of this report. Here, an attempt 

 is made to answer the above questions for a clearer understanding 

 of the insurance problem in the commercial fishing industry through 

 presentation of a restricted amount of data and a discussion of the 

 insurance principles and practices which adversely affected the loss 

 experience of insurers during 1950-5^. 



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