BEST'S INSURANCE REPORTS—FIRE AND MARINE.   685

CONTINENTAL AUTO INSURANCE ASSOCIATION— Continued.

Its statement as of December 31, 1919, is as follows:
Admitted cash assets: Bonds and stocks owned (market
value), $39.600: cash in banks and office, $25,967.54: total
cash assets, $65,567.54.

Liabilities: Losses in process of adjustment, $7,779.30;
due attorney-in-fact for administration expense, $23.922.41;
total liabilities, $31,701.71; net cash surplus, $33,865.83;
total, $65,567.54.

Cash Income, 1919.— Premium deposits (membership
fees, etc.) written, gross, $253,098.83; less reinsurance,
$4.20; net, $253,094.63; guarantee fund, $52,000; total

cash income, $305,094.63.

Cash Disbursements, 1919.— Losses paid, gross, $39,-
045.29; less salvage, $261; net losses, $38,784.29; paid to
attorney-in-fact for administration expense, $57,408.53;
agents' commissions, $129,662.91; legal expense, $1,209.77;
taxes, licenses and fees. $76.52; expense of adjustment—
settlement losses, $2,055.10; other expenses, $12,286.73;
total cash disbursements, $241.483.85.

In connection with this report, see important article in
troducing this section.

CO-OPERATING INTER-INSURANCE BUREAU,
19 South La Salle Street, Chicago, Ill.

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."

The agreement with subscribers provides that from pre
mium deposits 25% may be deducted for commissions and
operating expenses. Fire losses are charged up to the pro-
portion that each policyholder's premium deposit bears to
the entire premium deposits of the exchange. The net cost
of reinsurance is also debited, and at each anniversary
date of the policy the balance remaining is considered as
savings and returned in cash.

The manager states that an annual saving of about 30%
has been effected for subscribers.

Reinsurance is paid for monthly at the policy rate, less
an agreed percentage of discount, the amount of this dis
count being divided between the policyholder and the mana
ger. That portion credited to the policyholder is returned
to him on each anniversary date' of his policy, and the
management states that as a portion of nearly every policy
is reinsured, the amount left in the hands of the manage
ment by the discount frum the cost of this reinsurance,
added to the premium on the amount carried net, creates a
fire fund much larger than the premium on the net amount
carried, which tends to eliminate the liability of an assess
ment on subscribers.

The funds of the exchange are controlled bY- a board of
trustees elected annually by the policyholders. The trus
tees in March, 1920, were: Augustus Ross, ex-officio, Chi
cago; George E. Hall, of the Apsley Rubber Company, Chi
cago; J. E. _Mullen, of the Acme Cracker Company, Chicago,
and J. T. Richards, of the Chicago Casket Company, Chi
cago. They also have the privilege of causing the cancella
tion of any risk carried that does not appear to them as
being up to the moral or physical standard required. The
manager is under bond approved by the trustees for the
faithful performance of his duties.

The exchange is licensed in Illinois only, but the mana
ger of this exchange informed us. under date of March 6,
1920, that it plans to make application for licenses in
Indiana, Michigan and Missouri.

Subscribers may at any time cancel any contract of
indemnity issued to them by the exchange and receive in
the event of cancellation the amount to their credit in the
fire fund account arising from premium deposits and sav
ings on such cancelled contracts deposited in the reserve
fund, after deducting losses paid or incurred before said
notice of cancellation, provided that no subscriber is per
mitted to withdraw while he is indebted to the exchange.

Service of process may be made upon the manager or the

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