RECORDS FOR FARMERS FIRE INSURANCE COMPANIES. 7 



Assuming that classification is either now practiced, or is contem- 

 plated for the near future, the books should provide space for a sum- 

 mary of insurance in force by classes as well as for total amount of 

 risks carried. This is necessary in order that the relative rates 

 adopted for the different classes may be checked up by experience and 

 altered if found to be inequitable. 



. The initial premium, which must in any case be recorded, and for 

 which space has been provided in column 18 of the policy register 

 (Form 1, right-hand page), should constitute the assessment basis, 

 taking the place of the amount of insurance, or what is frequently 

 called the face of the policy, for this purpose. Where the suggestions 

 contained in the footnote, page — , are followed, the actual calcula- 

 tion of an assessment against a given policy is simplified rather than 

 complicated by this method. 



When an increase in a given policy or a cancellation therefrom has 

 been made, however, it becomes necessary to arrive at a new assess- 

 ment basis by the proper addition, as indicated in column 20, or by 

 the proper deduction, as indicated in column 21 of the form re- 

 ferred to. The adjusted assessment basis is recorded in column 22. 

 Each policy is assessed upon the basis of the initial premium re- 

 corded in column 18, unless by reason of changes in the amount or 

 classification of the insurance a new assessment basis has been cal- 

 culated for the policy and recorded in column 22. 



More than two-thirds of the existing farmers' mutuals, as already 

 stated, write their policies for a period of five years. It will be 

 noticed that space has been provided for five successive assessments 

 against a policy. If the plan of charging one year's cost in advance, 

 as suggested in Department Bulletin 530, is followed, however, only 

 four assessments will normally be levied against a five-year policy. 

 Under these circumstances the fifth assessment column may be re- 

 served for a special assessment in case it should be found necessary 

 or desirable to levy one. 



surance Company." The general plan of classification therein outlined has been indorsed 

 by the National Association of Mutual Insurance Companies. While usable as a basis for 

 classification by farmers' mutuals located in different parts of the country, it should be 

 modified, wherever necessary, to meet local conditions. 



One of the most common objections to a classification of risks has been based upon 

 the feeling that it would complicate the levying of assessments. This objection has been 

 removed, it is believed, by the plan outlined in Department Bulletin 530, namely, that of 

 levying the assessments upon the basis of initial premiums collected, instead of upon 

 the amount of insurance carried. Where the initial premium rates have been properly 

 adjusted this plan is entirely equitable, and it is fully as simple as the plan of calculat- 

 ing assessments upon the amount of the policy In the absence of legal provisions 

 prohibiting or unduly restricting advance assessments, such initial premiums may 

 properly cover approximately one year's cost of insurance. Assuming that such is the 

 case, the directors, instead of voting an assessment of 25 cents per $100 of insurance, 

 as might have been done under the old plan, call for an assessment of 90, 100, 120, or 

 some other per cent of the initial premium. 



