Insurance Affiliation

by A. C. BAKER Northwestern Mutual Fire Association, Los An'geles' Ad,dress given bef oie ihe Annual Conuention of the California Retail Luntbermen's Associution.

A certain Rhode Island manufacturer, nearly a century ago, built a fine plant and he equipped it with every device for prevention of fire then known. Upon applying for insurance he expected due. consideration for the safeguards en:ployed. He was informed that a cotton mill was a cotto--n mill, and the rate was thus and so. This manufacturer felt he was being discriminated against. He objected to having the rate on his fine plant based upon the fire hazards existing in oiher less desirable planfs, and over which he had no control. A"neighboring mill owner-had just completed a similar plant.- He went io this ireighbor and put to him a proposition like this-I am unable to securJat any equitable rate insurance on my new plantyou are in the same position-I propose that in the event of a fire loss in my plant you will become responsible for the same up to $100,000J will agree in turn to assume responsibility.for- an equal imount on your p1ant, on a condition that I am permitted to enter your plant it ani time and make any suggestions I feel warranted, iooking toward its safety. You shall have the same privilege in my plant. This idea appeiled to the neighboring mill owner and the igreement was entered into. As other fine plants in the same vicinity were erected this agreement extended until some ten or twelve plants lvere in this agreement-if I correctly understand the theory of trade associations, it is co-operation in solving problems common to all. In the particular case cited a mutual company was formed to take over thia business. Later other companies were formed, and there are today 31 of these companies known as the New England factory mutuals with a record of 90 years of successful operation behind them and insuring around 800O of the leading industrial plants of the United States and Canada for a total of around ten billion dollars. Their losses have been negligible, again due to co-operation between the insurance people and property owners in preventing 6re loss.

As trade associations have developed, fire insurance has become an important factor in their activities, and this has generally been due to the feeling that the particular trade or industry was discriminated against. by existing insurers and charged rates based on the fire hazard, of less desirable or more hazardous risks.

Exanples of this are found in the flour mills and elevator industry, which since 1875 has developed a strong group of mutual companies serving that industry. Another outstanding example is the retail hardware trade which has its own association companies serving retail hardware dealers throughout the United States and Canada.

During the last thirty years the conditions I have set forth have led to the organization of a considerable number of mutual companies sponsored by various retail lumbermen associations throughout the United States. Some of these companies have been organized by the associations themselves, and their operations have been limited to the territory covered by the particular association. Examples of these are found in the Northwestern Association, Southwestern Association, Texas Association, and for many years the Western Retail Lumbermen's Association has had a mutual company which was, during its operation, an important factor in stabilizing insurance conditions throughout the field served by that association.

Other companies primarily sponsored by the retail lumbermen's associations have extended their business on a nation-wide basis, and are now serving the needs of the lumber industry throughout the lv'hole United States and Canada. These companies have grown rapidly in the scope of their operations through financial strength and their usefulness to the industry.

IJnder present competitive conditions it is extremely difficult to build up an insurance organization within the restricted territory of a trade organization to a point where it is strong enough to effec- tively serve its purpose, and for this reason trade associations in recent'years have generally sought affiliations with companies- .which are sirving their-industry, and which are already -firmly established'

The Noithwestern Mutual Fire Association and its associated comp""i"t l* *eli-i.iatlistted in the Pacific Coast-field, hav-ing.served ihe industry in this territory for the past tw€nty years. In the.furtherance oi our service to lumbermen in California territory, it is but natural that we should seek a closer affiliation than has heretoiore existed with the California Retail Lumbermen's Association. We believe that our best interests travel hand in hand with yours, and that we can be mutually helpful in solving our common problems'

'We have detailed two meir to this work who will act in the dual capacity of field representatives of your ass.ociation and as insurance advisois to your members. We are educating these men on matters directly affetting association work in order that they may.b-e -of real assistance in thi activities of your association. They will form a constant contact between the individual members and your secretary's office.

(Report forms)

These men are experienced in all matters pertaining to fire and automobile insurance. They are qualified to offer suggestions to y9!1 on new construction and eitensions, and tell you what the efiect will be on your fire hazard and rate. In this their work will be supplemented by the engineering and inspecting departments at Los Angeles or San Francisco, rvherever needed. They will inspect your yards and ofier any needed suggestions relative to general upkeep and housekeeping conditions (than which is nothing more important to safeguard youi plant against fire loss) furnish you with necessary safety signs, examine your existing policies to see if you are properly and.idequately covered, and perform any other service for you per-. tarnlng to youf rnsurance.

They will also establish equitable rates of insurance on your yards rr-hich-fairly reflect the fire hazard, and will show you how your insurance cost may be reduced by placing your insurance through your association company. The average yard should save- enough through reduced insuranie iost to pay iti annual dues to the state association. To illustrate-I have just checked over Mr. Overend's report on a Central California lumber yard carrying about $30,000 of insurance. Their annual dues to the state association are $25, and the annual savings we are able to effect for them from their present. cost is $45. ThiJis, I think, a fair example of what can be agcomplished in this direction.

The Northwestern is paying the salary and expenses of these men. fn order to justify this service we must show a proportionate increasg in our re!:ri[ lumber business which will justify the expense incurred. We arCill well sold to the theory that any plan of co-operation must benefit all parties thereto, otherwise it is useless'

'We are convinced that with your help and co-operation that this affiliation will become a powerful factor for good in the state association. To this end we pledge our best efiorts.

We recommend that your board of directors appoint a comnittee within the association to work with us on these matters. We believe that such a committee would be very helpful to us with their advice and council.

Co-operation and mutuality, while not synonymous terms, lre closely-related. May I leave with you a definition of mutuatitv-lv Mr. Martin, the Northu'estern's president: MUTUALITY IS COOPERATION WHICH SEEKS TO BENEFIT ALL PARTIES IN PROPORTION TO THEIR CONTRIBUTION TO THE RESULTS OBTAINED.''

We manufacture everything in Durable Douglas Fir, and we take pride in our quick and reliable service from our two large, modern mills.