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Letter to Editor
October 13, 1908
The Sun
New York, New York County, New York
What is this article about?
Insurance professional R. E. Fletcher argues in a letter to The Sun that bank deposit insurance rates should vary by bank risk levels, like fire insurance, using Arkansas-Missouri rate differences as an example to ensure fairness.
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OCR Quality
95%
Excellent
Full Text
An Insurance Man's View of Bank Deposit Insurance.
To the Editor of The Sun—Sir: There is one feature of the proposed bank deposit guarantee which I have not seen discussed but which would undoubtedly present itself if the scheme were put into practice. That is the physical hazard of the risks assumed. Fire insurance companies base their rates on the physical hazard of the risks they accept; for instance, a frame building is rated higher than a brick or stone structure, while any building with hazardous occupancy or exposure is rated accordingly.
A close parallel could be drawn in the matter of relative physical hazards in banks of any city or State. One may have careful and experienced officers and an abundant surplus while the other may be in charge of inexperienced, speculative and incapable men, and it would therefore be unjust to the stronger and more secure bank to pay the same rates as its less secure competitor.
And again, fire insurance companies find the loss ratio greater in one State than in another, perhaps adjoining State. As an example, the rates on some classes of buildings in Arkansas are nearly double those in effect in Missouri, and should the losses in bank failures be greater as in the fire losses would not Missouri bankers object to paying the same rates as Arkansas?
R. E. FLETCHER.
Osceola, Ark., October 9.
To the Editor of The Sun—Sir: There is one feature of the proposed bank deposit guarantee which I have not seen discussed but which would undoubtedly present itself if the scheme were put into practice. That is the physical hazard of the risks assumed. Fire insurance companies base their rates on the physical hazard of the risks they accept; for instance, a frame building is rated higher than a brick or stone structure, while any building with hazardous occupancy or exposure is rated accordingly.
A close parallel could be drawn in the matter of relative physical hazards in banks of any city or State. One may have careful and experienced officers and an abundant surplus while the other may be in charge of inexperienced, speculative and incapable men, and it would therefore be unjust to the stronger and more secure bank to pay the same rates as its less secure competitor.
And again, fire insurance companies find the loss ratio greater in one State than in another, perhaps adjoining State. As an example, the rates on some classes of buildings in Arkansas are nearly double those in effect in Missouri, and should the losses in bank failures be greater as in the fire losses would not Missouri bankers object to paying the same rates as Arkansas?
R. E. FLETCHER.
Osceola, Ark., October 9.
What sub-type of article is it?
Informative
Persuasive
What themes does it cover?
Economic Policy
What keywords are associated?
Bank Deposit Insurance
Physical Hazard
Fire Insurance
Bank Rates
Arkansas
Missouri
What entities or persons were involved?
R. E. Fletcher
To The Editor Of The Sun—Sir
Letter to Editor Details
Author
R. E. Fletcher
Recipient
To The Editor Of The Sun—Sir
Main Argument
the proposed bank deposit guarantee should incorporate varying rates based on the physical hazards of different banks, similar to fire insurance practices, to avoid injustice to stronger, more secure banks paying the same as riskier ones.
Notable Details
Draws Parallel Between Fire Insurance Rates And Bank Risks
Cites Higher Rates In Arkansas Vs. Missouri As Example