MUTUAL HAIL INSURANCE 209 



vision of the State Insurance Department. It claims as its five 

 cardinal principles the following: fair treatment; best protection 

 at lowest cost; fair adjustment of losses; prompt payment; a 

 thorough annual audit. The nominal rate of premium is 6 per 

 cent of the risk. But the amount of the risk is strictly limited, 

 $100 being the minimum; the maximum on any one quarter section 

 is $800, $1600 on any one section, and $20,000 on any one town- 

 ship. Insurance in no case shall exceed $8.00 an acre. There is a 

 so-called " contingent liability" of 6 per cent in addition to the 

 nominal 6 per cent premium. The amount of premium collected, 

 usually four or five per cent, depends of course on the losses for 

 the year. If 12 per cent should prove inadequate (i.e., ninety-six 

 cents an acre), the losses are to be paid pro rata and this to con- 

 stitute a full settlement of the insurance. No unpaid losses are 

 to constitute a liability in the next year's accounting. Applicants 

 for insurance in nearly all cases give their note due October 1. 

 Insurance is written solely on the mutual plan, and only one 

 assessment can be made in any one year, and that only for the 

 current year's business. 



Only four times in the history of this company were there 

 unpaid losses, these amounting to $64,428.91, or less than one- 

 fourth of one per cent of the risks carried. There is no " table of 

 mortality" in the hail insurance business, and each company 

 must be its own actuary. The cost per $1000 of insurance varies 

 widely from year to year. Had this company met all its losses 

 during the first 19 years of its existence, the actual cost would 

 have been $46.82 per $1000. Hence a six per cent assessment, 

 if collected, would be more than ample. This company passed 

 through two crises in its history, but managed to survive both. 

 Only twice did the administrative expenses exceed the losses paid. 

 These occasions were when the business was at a low ebb and the 

 losses unusually light. The chief item of expense is the commission 

 paid to agents. And here is the paradox of the middleman again! 

 By experience this farmer's company has found out that the more 

 it pays to agents (to the " middlemen"), the less it costs the farmer 

 for operating expenses. For exactly as more agents are employed 

 and the volume of business becomes greater, the less becomes the 

 portion of the total outlay going into operating expenses, and the 

 greater becomes the portion of outlay going into the payment of 

 losses. In short, the more the farmers pay these middlemen the 

 less the farmer's insurance costs him. Yet, according to the 

 theory of "direct marketing" there should be no costs at all for 

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