A FARMERS’ MUTUAL FIRE INSURANCE COMPANY. 17 
isreduced toa 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 
