3. The highly competitive state of affairs ojuong insurers is 

 another factor which prevented greater risk differentiation and kept 

 the premium lover than mi£;ht have been possible other\rise. 



k. On the other hand, other factors contributed to high cost 

 and losses for the insurers. Tlie nature of the risk requiring 

 specialized knowledge in handling it, the geofjraphical dispersion 

 of the risk, and the presence of physical and human elements which 

 may suddenly change the hazard, the relative small value of the 

 risk compared to the time-consuming process in handling it, and 

 possible duplication in insiu'ance services contribute to high 

 operational costs. Besides the above sti-ucturaJL factors, opera- 

 tional costs may have increased because of frequency and severity 

 of claims during 1950-5^t« 



5- In spite of serious effort, competition amo-^ig insurers 

 prevented adequate restriction of the coverage, namely, the Inchmaree 

 claut:e and the deductible aiiount for hull insurance, the deductible 

 clause and amount on personal injury for protection and indemnity 

 insurance. The above conclusion, however, is reached in retrospect 

 and in vi yw of the realities in the market. 



6. During 1950- j'*^* overinsurance was ladely practiced in New 

 England and, to a lesser extent, in the Gulf Area and California. 

 Overinsurance is the combined effect of falling earnings which 

 automatically lover t'.ie value bf a vessel through the capitalization 

 process, the pressure of the insured vessel o-'.mer, the broker's 

 policies, and lack of internal controls between insurer and his 

 representatives. In any case, overinsurance constitutes a serious 

 disregard of sound and basic insurance principles. Available 

 evidence empiiasizes the ijaportance of overinsurgnce as a probable 

 factor v;hich contributed to total losses. 



7- Mso, some imperfections in surveying vessels for both kinds 

 of insurance, especially hull insurance, may have contributed to the 

 insurer's losses. Evidence shoves that a fev vessels in all areas 

 are not sui-veyed before they are insured. In the Gulf Area many 

 surveyors are pressed to make favorable surveys since insurers have 

 the practice of paying for their services only if the vessel is 

 accepted. 



8. Adjustment of hull insurance claims is a process which 

 frequently brings to a clash the opposing interests of the insurer 

 and the insured. It was found that resistance of the surveyor and 

 the insurance broker against the ovmer's pi-essure and their vigilance 

 over inflated shipyard bills are not always present or strong enough 

 to protect the insurer's interest effectively. 



9. Ihe frequently unreasonable demands of injured seamen, 

 encouraged by lairyers, doctors, and union officials with or vdthout 

 litigation may have contributed to higher losses and claim expenses 

 for the insui-erc. 



Ih5 



