home office underwriter is the
court of last resort. Generally speaking, the agent secures the business
and offers it to the company for its acceptance. If, when it comes, the
underwriter feels that the rate of premium is not commensurate with the
hazard, he writes the agent, 'Rate too low: please cancel.' And there is
where his diplomacy comes in. The agent, who must now get back the
policy from the assured, must not be offended, or his more desirable
business will be placed in some rival and more liberal company. If, on
the other hand, the rate of premium seems adequate, but the amount at
risk is too great, the underwriter reinsures or cedes a part of his line
to another company, paying it a proportionate part of the premium, and
holds only what he thinks safe. And here is where his judgment is
needed. The company has what it calls its idea of line--which means that
it doesn't want to lose more than a certain amount, say five thousand
dollars, in any ordinary fire. . . . I'm not boring you?"

"Oh, no," said Helen. "I'm following it all."

"Well, then, what the underwriter is supposed to do is to decide, from
the kind of risk he is asked to insure, how much the Company can write,
and still not be liable for a greater loss than five thousand dollars in
any ordinary fire."

"How can he do it?"

"By knowing his business. When he passes on a foundry, for example, he
ought to know, first, the fire record of foundries in general; second,
what rate of premium they ought in general to pay; and third, what the
dangers, or, as we call them, hazards, are. By looking at the map he
must be able to tell where the fire is most likely to start--where, in
other words, fires usually do start in foundries. Probably it will be
the cupola charging platform or the core ovens. Then he can closely tell
from the construction of that particular foundry, considering also the
protection, extinguishing appliances, public water pressure, nearness of
the fire department, and fifty other considerations, how much of the
whole plant would burn--probably. If only half, then he feels safe in
writing ten thousand dollars on the risk, since only half of it is likely
to be destroyed by one fire."

"I don't see how you can tell."

"Well, most companies have quite elaborate line sheets to assist their
underwriters in determining how much to hold on various classes of risks,
but between you and me, you _can't_ tell surely. But you do the