10 BULLETIN 530, TJ. S. I>EPABTMENT OF AGRICULTURE. 



INSPECTION OF RISKS. 



By means of reasonable care in the selection of the risks from a 

 physical standpoint, together with precautions to eliminate the moral 

 hazard, it is possible for a farmer's mutual fire insurance company 

 to bring the average annual loss ratio considerably below what would 

 be expected from the experience of larger commercial concerns in- 

 suring farm risks. Since the expense item in the annual budget of a 

 farmer's mutual is easily held below the corresponding outlays of 

 commercial concerns, a considerable saving to the members can be 

 effected. To stop here, however, is to fall far short of realizing the 

 possibilities of a farmers' mutual insurance company. The annual 

 fire loss in the United States, within as well as outside the farmers' 

 mutuals, is very much higher than it should be, judged by the ex- 

 periences of other countries. A large percentage of the fires that 

 occur are readily preventable, and there is no better way for the 

 company to live up to its purpose of safeguarding its members against 

 disastrous loss burdens than to eliminate, as far as possible, all 

 preventable losses. 



The first and perhaps the most important step in a program for 

 the improvement of risks and the elimination of preventable losses 

 is an efficient system of inspection. Many defects that constitute fire 

 dangers could be discovered and removed by a more thorough inspec- 

 tion than is now generally made by the representatives of the com- 

 pany who take the applications for insurance. It may be doubted, 

 however, whether highly satisfactory results can be secured without 

 the employment of a special inspector who makes a careful study of 

 fire dangers and who inspects thoroughly all risks of the company 

 at least every two or three years. It may be found that annual in- 

 spection is necesesary for the best results. The experience of other 

 classes of mutuals has amply demonstrated that mone} 7 spent for 

 efficient inspection of risks' is a wise and profitable investment. 



FORM AND TERM OF POLICY. 



A reasonable uniformity among the farmers' mutuals in regard 

 to their policy forms is undoubtedly desirable and should be en- 

 couraged. The advisability, however, of requiring them to use a 

 standard policy applicable to all classes of insurance may be ques- 

 tioned. In many instances where the use of the standard policy by 

 these companies has been prescribed by State law, they have con- 

 tinued to consider the by-laws printed on the back of the policy as 

 the real agreement between the company and the insured. 



It is unquestionably a condition essentia] for success in cooperative 

 effort that the agreement between the organization and its members 



