COMPANIES. The relation of a person insured in a mutual company to the company is by no means so simple as in the previous ease. In the simplest form of mutual insurance the funds necessary to pay losses are raised by as sessment after the losses have occurred. Under such a system neither profit nor loss can arise, as the assessments are made to cover only loss and expenses. Experience has shown, however, that it is extremely difficult to raise the required amount in this way, whenever losses are un usually heavy. The general custom among the older mutual companies at the present time. therefore, is to collect a part of the necessary funds by premiums paid in advance, and to hold the insured responsible for such additional amounts as may be required to pay losses. The liability of the insured is. however. frequently limited to a certain amount, or to a certain pro portion of the cash premium. This liability varies in different companies from a sum equal to the premium to a suns equal to five times the premium, and occasionally to an even greater sum. Many of the older companies have accumu lated large surpluses, nut of which they are able to pay any exceptional losses they may suffer, and in normal years to return to the insured in the form of dividends a very considerable part—not infrequently as high as 90 per cent.—
of the sum collected as premiums. In the West ern States in recent years the mutual principle in fire insurance has manifested itself in the es tablishment of numerous 'town' and `county' mutual companies. The activity of these com panies is usually limited to a single town or county. They are very largely engaged in insur ing the property of farmers. They act on a plan somewhat different from that of the older Eastern companies. Instead of keeping up rates, and using the annual gain to accumulate a sur plus or to increase dividends, they establish com paratively low rates. On long-time insurance usually a small part of the premium is paid in cash and the rest is paid by premium notes, The liability of the insured is limited to the amount of the notes given by him. No payments have to be made on these notes unless the losses of the company compel it to make an assess ment. At the expiration of the term of insur ance the notes are canceled. In many of the States the companies are authorized to count these premium notes as the whole or a part of the legal reserve, and they are to that extent freed from the necessity of accumulating a cash reserve sufficient to reinsure outstanding risks.