supeinrisor who reported this arrangement, the London underwriters 

 "used the umbrella provided by the pool to pick out the best risks 

 by quoting a rate 15 percent lover sjid skimmed off the best of the 

 market. Dissention among underwriters led to a break-up of the 

 fishboat committee and the market is now completely free. Each 

 insurer sets his o^m rates with an eye on his competitors." The 

 unprofitable loss ratio of American insurers in California reflects 

 the experience of all nonalien insurers and in spite of the satis- 

 factory experience of the Commercial Fishennen's Inter- Insurance 

 Exchange . 



The same table 30 shows that in New England, American insurers 

 had a profitable experience from protection and indemnity insurance 

 with a loss ratio as low as 31 -^f while alien insurers did not have 

 a profitable experience, as the 201.5 loss ratio indicates. In 

 California both groups of insurers had an unprofitable loss experi- 

 ence, but losses were much more severe among alien insurers with a 

 loss ratio as high as 258. U, than they were among American instirers 

 who averaged a loss ratio of 82.2 during 1950-5^. As has already 

 been shown, no protection and indemnity insurance losses occurred 

 in the small Gulf Area sample. 



The effect of competition among insurers can be seen by a 

 comparison of the above loss ratios and premium collected by the 

 two groups. The differences in the premium for hull insurance 

 between American and alien insurers, shown in table 31> were not 

 as wide as differences in their loss ratios. A few observations 

 will illustrate the point. Although alien insvu-ers in New England 

 had an adverse selection of risks in terms of premivmi ratio, they 

 charged less than their American competitors. A New England owner 

 paid, on the average $¥i- per $1,000 of insurance to American 

 insurers and $^3 to alien competitors. The unprofitable experience 

 of alien insurers occurred because the premium they charged was not 

 in proportion to their heavy losses. While alien insurers collected 

 $2,129 in net premium per policy which was less than the net premium 

 of $2,337 collected by American insurers, the former paid as much as 

 $1,776 in losses and claim expenses per policy as compared to the 

 latter who paid as little as $1,^91 per policy (tables A-85 and 86 in 

 Appendix A) . 



Competition for hull insurance risks among insurers had the 

 reverse effect in California. It was the majority of American 

 insurers who had an unprofitable loss experience and not the alien 

 competitors. As has already been explained, most American insurers 

 failed to differentiate adequately among risks by relying totally 

 on age and value for rating vessels. Alien competitors were able 

 to obtain a favorable selection of risks by quoting slightly 

 lower insurance cost to relatively good risks. 



131 



