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AUTO INSURANCE STAFF AND EMPLOYEES* 



Ten Years of Hustlin' 



Farm Bureau Auto Insurance Company 

 Celebrates a Birthday 



\J>W ACK in the late months of 1926 

 ^^/■\ Farm Bureau members all over 



J } the state received notices from 

 the lAA that if they desired to start a 

 mutual auto insurance company they 

 should send in an application for mem- 

 bership with a $25 check attached. When 

 and if such a company could be formed, 

 they were told, they would be charter 

 members and their car, regardless of age 

 or make, would be insured against any 

 kind of damage, fire or theft. 



Unless a thousand applications and 

 checks were received in a reasonable 

 length of time, the notices said, all checks 

 would be returned to the senders and the 

 plans for an auto insurance company 

 would be shelved. 



The plan was not shelved and by 

 April 1st, 1927, almost 3,300 checks had 

 come into the lAA offices. The lAA 

 annual report for 1927 says, "They sent 

 in applications with checks attached pro- 

 viding the necessary free surplus re- 

 quired under the Uniform Mutual Law 

 of Illinois. The company started operat- 

 ing April 1st. The insurance was put 

 into effect as of noon on that date." 



From then on the owner of a car to 

 be insured paid an initial sum of $25. 

 Of the $25, $5 was a policy fee which 

 paid the cost of getting the business on 

 the books and of printing the policy. 

 Ten dollars was a premium deposit to 

 cover the cost of insurance for six 

 months. The remaining $10 was put in 

 the surplus of the company and entitled 



* This picture was taken about 6 months ago. 



the owner to one surplus share in the 

 company. 



When the six months period was 

 ended, the policyholder paid his share 

 of losses and expenses which automati- 

 cally restored the policy to good stand- 

 ing. Each surplus share was credited 

 with a proportionate part of the profits 

 of the company. 



The company limped along on this 

 basis until October 1, 1927, at which 

 time it was possible to ascertain the cost 

 of doing business. On that day a call 

 for premiums was sounded. Full cover- 

 age on a new Ford was offered for the 

 remarkably low cost of $4.90 and on an 

 old Ford for $4.40. 



By December 15th of the first year, 

 Illinois Agricultural Mutual Insurance 

 Company had 6,446 p)olicies in force. 

 That was a good showing for a company 

 only eight months old, but it is a small 

 figure when compared to the 54,000 

 policies now in force. 



During the ten years of its existence 

 the board of directors of the company, 

 which are identical with the board of 

 directors of the lAA, have firmly held 

 to the original plan and purpose of the 

 company, namely, to render a co-opera- 

 tive insurance service exclusively for the 

 Farm Bureau member and his family. 

 The experience of the company proves 

 beyond a doubt that Farm Bureau mem- 

 bers are really preferred risks. 



In 1933 it was found that original 

 "surplus share plan" of the company was 

 making it difficult for some Farm Bu- 



reau members to take out insurance. The 

 requirement of the surplus share plus the 

 rather substantial deposit premium ran 

 the cost to new patrons too high. A 

 new plan of operation, called the "sur- 

 plus fee plan," was set up. 



"This plan provided that the farmer 

 pay only the regular policy fee plus the 

 going six months' premium plus an in- 

 terest charge on the money he kept at 

 home and was not asked to deposit as 

 were previous policy holders," A. E. 

 Richardson, manager, says. 



By 1935 the surplus of the company 

 had reached the point at which it was 

 deemed advisable to write only guar- 

 anteed rate, non -assessable contracts. All 

 the old contracts were taken up and new 

 policies issued. More than a quarter 

 million dollars was returned to policy- 

 holders of the company at that time. 

 This fund was the accumulation of sur- 

 plus share and excess premium deposits. 



Richardson points out, "Today the 

 company is operating under a cash prem- 

 ium plan,' that is, the policyholder pays 

 in advance the cash premium for six 

 months. This is the rate for six months 

 and the policyholders are not liable for 

 any additional premium for any cause." 



During the early years of the company 

 and up until 1933, only 20 policyholders 

 in each 100 reported claims. Since then 

 the percentage of claims has steadily in- 

 creased. In 1934, 22.2 per cent of the 

 policyholders were involved in accidents. 

 In 1935 the percentage increased to 28.1 

 per cent and in 1936 it grew to the 

 astounding figure of 34.1 per cent. 



Greater farm income is believed to be 

 a factor for the larger number of acci- 

 dents. With more money on which to 

 travel, farmers are driving more and are 

 going to more distant fX)ints. 



The fact that the company is issuing 

 more policies carrying more forms of 

 coverage is also a factor in the increas- 

 ing number of claims reported. Policy- 

 holders are now entitled to report claims 

 for damage not covered by earlier pol- 

 icies. 



When the company began in 1927 it 

 had three employees. It now employs 48 

 [jersons. Half of this number is em- 

 ployed by the claims department of which 

 L. V. Drake is superintendent. 



In contrast to the three desks original- 

 ly used which took up only one small 

 corner in the lAA office, the company 

 now occupies more than 4,000 square 

 feet of space on the floor above the lAA 

 offices in the Transportation building. 



Two employees who were with the 

 company in 1927 are A. E. Richardson, 

 manager, and E. J. Ernst, the manager's 

 assistant. 



APRIL, 1937 



27 



