A farmers' mutual fire insurance company. 17 



is reduced to a minimum. Unless the local farmers* mutual is willing 

 to make concessions from its average rate for a risk of this kind, 

 such risk is likely to be lost to the company. Furthermore, by giv- 

 ing reasonable concessions in its charges on desirable risks, the com- 

 pany offers a strong inducement to the farmer to improve his prop- 

 erty by eliminating needless fire dangers. 



A suggestive classification of farm property will be found in the 

 accompanying by-laws. If an initial premium proportionate to the 

 hazard is charged, and this premium is used as the basis for all assess- 

 ments on the plan also provided for in the by-laws, the added work 

 imposed upon the secretary by classification will be very small. Such 

 a classification will enable a company to make more equitable charges 

 for insurance, to safeguard itself against competition, and to encour- 

 age the improvement of its risks. 



The method of handling the classification is further explained by 

 the application and policy forms attached. In the space in the appli- 

 cation for summarizing the insurance by classes will be found sug- 

 gestive rates for each class. These rates, like the classification itself, 

 will need adjustment in many instances in order to reflect, as nearly 

 as may be, both average insurance cost and relative hazards on the 

 different classes. 



SETTLEMENT OF LOSSES. 



The duty of the insured to prevent and to limit fire losses as far as 

 possible should be clearly expressed in the by-laws. A provision 

 should also be made to the effect that a sworn statement may be 

 required of the insured as to his knowledge and belief in regard to the 

 cause of the fire and the amount of damage or loss. Arbitration 

 should be provided for to settle difficulties that may arise as to the 

 amount of indemnity due. The simplest and perhaps the most satis- 

 factory way of arranging for this arbitration is to have the company 

 and the insured each select one member of the arbitration board, and 

 then require the two so chosen to select a third member. 



The cost of the arbitration should be borne equally by the company 

 and the insured. It is sometimes argued that the party who, accord- 

 ing to the findings of the board, is proven to have been in the wrong 

 should pay the entire cost of arbitration ; or, in other words, that the 

 cost should be borne by the insured unless the award previously 

 offered by the company is increased by the decision of the board. 

 When such a provision exists, however, it frequently causes the arbi- 

 tration expenses to influence the action of the board in a needless and 

 unwarranted manner. It is felt, for instance, in the case of a member 

 with modest resources who may have been honestly mistaken as to the 

 value of the destroyed property, that circumstances justify the rais- 



78934°— Bull. 530—17 3 



