RI 2607 Preminum Rates for Compensation Insurance Metal Mine Workers

"When a metal-mining company takes out a workmen's compensation insurance policy, it does so to relieve itself of its uncertain and variable financial liability under laps requiring payment to employees for lost-time accidents, there-by passing the liability or to the insuring agency. For this service, or rather for the assumption of the risk, the insuring agency charges the mining company a price, or in insurance parlance, ""a premium"".The insuring agency depends upon a volume and variety of business to average the losses incurred by its individual policy holders, and determines its price to cover losses that are suffered and its cost of doing business.It is generally known that all types of insurance are founded on the theory of probability applied to large groups of risks, Workmen's compensation insurance is no exception, and the average price paid therefor must be based on the frequency and severity of accidents in the particular industry or branch of industry under consideration. The frequency and severity rates are determined by statistics, which, of course, unless standardized, kept carefully and consistently, and analyzed properly, are liable to be inaccurate and misleadingThe importance of large groups in arriving at an average price for insurance service can not be overestimated, For example the writer knows of one small group of some twenty metal-mining companies whose losses during the past two years exceeded their premium charge by 54%. Not a single individual company during the two years kept its losses below the premium rate. For several years the group as a whole has persistently exceeded its premium rate, Such risks are not profitable to the insuring agencies and can only be carried where a large volume of good risks will balance the poor risks, but in order to conform to good insurance ethics the premium rate must be based on averages for the industry as a whole, and kept sufficiently low to induce operators to sell their risks."