History.— This inter-insurance exchange began business
in July, 1914, and was licensed by the Illinois Insurance
Department in April, 1917.
Management.— The attorney-in-fact and active manager
is Augustus Ross, who states that he has had about ten
years of experience in handling this form of insurance.
The exchange makes a weak statement. (See below).
We are investigating reports made to us recently con
cerning its methods in connection with loss claims.
Plan of Operation.— The exchange issues policies cover
ing loss by fire or sprinkler leakage. The subscribers' agree
ment does not designate the classes of risks to be insured,
but the exchange accepts mercantile and manufacturing
buildings and contents. Its manager states that it writes
gross lines of $50,000 to $75,000, of which not more than
$3,000 on unsprinklered risks and $3,000 to $5,000 on
sprinklered risks is retained net.
It is stated that full board or tariff rates are charged,
and each subscriber is liable to assessment equal to the
amount of the original premium paid. Any portion of the
amount so assumed can be called for, if the losses and
operating expenses exceed the premium income.
The power of attorney and agreement with subscribers
provides that at least one-half of all savings shall be re-
turned to the subscriber in cash, and the other half may be
retained by the exchange and applied as a part of the "re-
serve fund," or assessment liability, assumed by the sub-
scriber; but up to this time the management has returned
the entire savings in cash annually.
The power of attorney signed by each subscriber pro
vides that the reserve fund is to be invested in bonds ap
proved by the Insurance Department of Illinois. Upon
inquiry of the manager and attorney-in-fact, he advised us
in 1918, as follows:
" We have thought it better for say the first few years to
return each policyholder his entire saving in cash, which
we have been doing. and we therefore returned to all but a
few of our policyholders the amount we are holding in the
reserve fund for them. The few referred to are those who
wished to have their entire reserve fund on deposit with
us. With the others the reserve is callable, and between
now and the end of the calendar year we have thought that
we would, at least with our old policyholders, again begin
accumulating their reserve funds in our hands, and invest
in bonds, so that probably in our next annual report we
will be able to give a list of the bonds."