10 BULLETIN 530, U. S. DEPARTMENT 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 
tarmer’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 money 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 ieee 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 essential for success in cooperative 
effort that the agreement between the organization and its members 
