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 bacis 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. 
