New Cash Premium Plan 

 Automobile Insurance 



By A. E. Richardson, Manager, Illinois Agriculfural Mutual 



Insurance Company 



KICHARDBON 



THE plan of converting all automo- 

 bile and truck insurance policies 

 in the Illinois Agricultural Mutual 

 Insurance Company to the new "Cash 

 Premium Plan" at the next premium 

 paying date after 

 April 1, 1935 was 

 approved in its final 

 form by the Board 

 of Directors at its 

 last monthly meet- 

 ing. This new plan 

 becomes operative 

 just eight years 

 after 3,000 Farm 

 Bureau Members 

 made application 

 for automobile In- 

 surance on blariks 

 furnished by the I.A.A. and the Coui^y 

 Farm Bureau which was the beginning 

 of the Company. The Board of Direc- 

 tors of this Company, which Board of 

 Directors was at the beginning, always 

 has been and always vyill be the same 

 Board of Directors as the Board of Di- 

 i-ectors of the I.A.A. " 



With no rates to go by and no ex- 

 perience but with full knowledge of one 

 fundamental fact and that is, that no 

 insurance company is sound unless the 

 policyholders pay all the losses and ex- 

 penses of operation and fully realizing 

 that if such a preferred group of people 

 as Farm Bureau members bound them- 

 selves together and formed a company 

 of their own that no company operating 

 throughout the State could compete in 

 cost and that no company was going to 

 furnish protection such as was needed 

 at anything but cost plus such profit 

 as the traffic would bear, there seemed 

 to be a great opportunity to really know 

 what insurance should cost. Few, if 

 any. Farm Bureau peoiple really knew^ 

 what they should pay for insurance 

 against loss or damage to their automo- 

 biles or damage which might be done by 

 their cars because few Farm Bureau peo- 

 ple had any opportunity to see the inside 

 workings of a casualty company or the 

 actual cost as shown by the books of 

 any company. 



At the time this Company was organ- 

 ized each applicant deposited with the 

 Company what was called a premiunm 

 deposit and made a contribution to the 



surplus of the Company which was 

 known as the surplus share and there 

 was issued to this group of early policy- 

 holders what we call the Surplus Share 

 Policy. 



The new Cash Premium Plan which 

 becomes eflfective as the policies come 

 up for renewal on and after April 1st 

 will provide a new policy with many ad- 

 ditional features which you will find 

 mentioned herein. It will further pro- 

 vide that all the excess deposit and sur- 

 plus share over and above the new cash 

 premium required to carry the policy 

 forward for the next six months will hv 

 returned to the policyholder in the form 

 of a check. This means that something 

 like >325,000 of excess premium deposit 

 and surplus share will be mailed to 

 Farm Bureau people holding this type 

 of policy at their next renewal period 

 provided they pay their semi-annual as- 

 sessment which will be sent them thirty 

 days before it is due. 



Policy holders insured under the "sur- 

 plus fee" plan will pay the same rates 

 hereafter as others. They will not re- 

 ceive any refund, however, since surplus 

 fee policyholders have not deposited 

 any excess over the regular assessment. 



The new Cash Premium Plan further 

 provides there be a redistribution of the 

 cost of the insurance over the various 

 price list groups which schedule of rates 

 is going to be somewhat higher on cars 

 having factory list prices of less than 

 $750. There will be a very slight in- 

 crease in the cost of insurance on cars 

 ranging between $750 and $1,000 and 

 practically all cars having a higher fac- 

 tory list price will have their rates re- 

 duced. This re-adjustment is in line 

 with the loss experience of the Com- 

 pany during the past five years. A 

 thorough analysis made by our Statisti- 

 cal Department and actuary revealed 

 that inequities existed that should be 

 corrected, namely, that the low price 

 group of cars was not paying sufficient 

 premium to put them on a self sup- 

 porting basis. While the total premium 

 income of the Company has been suffi- 

 cient at all times to pay all losses and 

 expenses and set up all the reserve 

 needed and has created a surplus to the 

 Company every year since it began 

 operation, yet your Board of Directors 



felt that each group of cars should stand 

 on its own lege. 



Here is how it will operate. Example 

 — John Brown has a full coverage policy, 

 including stationary object collision, un- 

 der the Surplus Share plan. Let's sup- 

 pose that he bought this car, which 

 came under $750, such as a Ford or 

 Chevrolet, in 1930 and insured it with 

 us for full coverage as described above. 

 Then let's suppose that his next as- 

 sessment date is April 20, 1935. John 

 Brown will be sent from this office a 

 regular notice of assessment such as he 

 has always been receiving, which amount 

 would be $6.18, which he will be asked to 

 pay. When he pays this $6.18 his 

 premium deposit and surplus share of 

 $28.00 will be intact. Then the Com- 

 pany will write up one of the new Cash 

 Premium Plan policies and send it to 

 him, deducting from his $28.00 the new 

 rate on his old car which new rate 

 would be $9.95 less a dividend of 10% 

 or $1.00 which would make a total net 

 deduction of $8.95 which would be taken 

 out of the $28.00, thereby returning 

 to Mr. Brown the Company's check for 

 $19.05. 



There might be a slight delay in is- 

 suing these policies on account of the 

 tremendous work involved. Your Board 

 of Directors, however, believe it is well 

 worth while to place in the hands of the 

 policyholders a new contract of in- 

 surance which is brought up to date 

 which will take care of many new needs 

 that a farmer has for automobile in- 

 surance. However, if the policyholder, 

 pays the assessment which is sent to 

 him promptly and by the time it is due 

 he will be fully protected for the same 

 type of insurance he now has plus the 

 new provisions in the Cash Premium 

 Plan policy. All policyholders who have 

 been in the Company 2y2 years will be 

 entitled to this dividend. This new 

 policy will have a guaranteed rate and 

 will be non-assessable. The additional 

 advantages may be listed as follows: 



(1) Fire and Theft— All New Policies 



will provide protection against k>8s 

 of all securely attached equipment 

 (except radio). 



(2) Collision — Any Policy providing 



protection against damage by 

 Moving or Stationary Object Col- 

 lision will also protect insured 

 against accidental breakage of any 

 plate glass. 



(3) Public Liability— All Policies pro- 



viding Public Liability protection 

 give any one the right to drive 

 automobile with owner's consent 

 unless prohibited by law on ac- 

 count of age. 



(4) Property Damage — $5,0U0 protec- 



tion instead of $1,000 for damage 

 to property of others. 

 (5> Temporary Insurance — New Cash 



APRIL. 193.-, 



