IS BULLETIN 530, U. S. DEPARTMENT OF AGRICULTURE. 



ing of the previous award of the company by a very small amount in 

 order to throw all expenses of arbitration upon the party which can 

 better afford to bear them. Such action, however, is decidedly unfair 

 to the company. The addition to the award and the expenses of 

 arbitration may not in themselves be serious considerations, but by 

 having its original award set aside the company's reputation for 

 fairness in the settlement of its losses is unjustly undermined. 



The damage by fire or lightning to a given piece of property often 

 appears to the owner much more serious than it really is. For this 

 reason a provision to the effect that the company may satisfy the 

 claim against it by repairing or rebuilding frequently proves of "Value. 



RESERVE. 



The question of whether a farmers 1 mutual insurance company 

 should aim to establish and maintain a reasonable reserve fund is 

 closely related to the question of advance or post assessment already 

 discussed. The reserve problem, however, leads still, further into 

 the question of how far the farmers' mutuals shall imitate the plan 

 now imposed by law upon all capital-stock insurance companies and, 

 in general, upon larger mutuals; namely, that of maintaining a cer- 

 tain reserve proportionate to the amount of business transacted. It 

 is frequently held that to build up a reserve fund deprives the mem- 

 bers of capital which each member might as well have in his own 

 possession until it is needed by the company. The truth of the 

 argument, so far as it goes, must be conceded. However, the neces- 

 sary additional amount to be contributed by each member in order 

 to build up a reasonable reserve is so small that it can not affect 

 seriously the business operations or the prosperity of the individual 

 members. 



A reasonable reserve in the treasury of the company, on the other 

 hand, performs a very useful function by equalizing the assessment 

 from year to year. In case unexpectedly heavy losses should be ex- 

 perienced it may thus prevent dissatisfaction on the part of the mem- 

 bers. In an extreme case it may even save the company from dis- 

 solution. The opinion appears to be growing among farmers' mutual 

 insurance men that under a plan of annual assessments a reserve 

 of about $3,000 per million of insurance in force is useful as a shock 

 absorber in the loss experience of the company. 



AMENDMENT OF BY-LAWS AND ARTICLES OF INCORPORATION. 



The by-laAvs, as well as the articles of incorporation, should pre- 

 scribe carefully the method of their own amendment. A reasonable 

 permanency in the company's plans and methods doubtless requires 

 that something more than a mere majority of favorable votes should 



