70      REPORT OF THE COMMISSIONER OF INSURANCE.


sending to the various manufacturing plants and business houses
trained engineers, who are graduates of colleges, to inspect the
pvlanlts, manke reconumnen dations as to" their improvernent, an-(i
embody their findings in a report to the exchange. A duplicate
copy of this report is forwarded to the manufacturer or merchant
with a request to notify the exchange as soon as the improve-
ments are fully completed. As each mnember of the ex(hange is
vitally interested in reducing the fire loss, the hearty co-opera-
tion of the subscribers is usually obtained, and repairs, removal
of waste material, and the installation of fire prevention appara-
tus come as a sequence to his co-partnership in the business. If
a subscriber becomes recalcitrant and will not follow the recomn-
mendations of the inspectors, he is immediately dropped froe,
the list. Usually the advisory committee passes upon these
eases and also the application of all new members. In the ac-
ceptance of new risks, the advisory committee or the attorney-
in-fact is quite careful to avoid those risks that will increase the
moral hazard. As the members of the advisory committee are
usually men of high financial standing in the particular line
that is being considered, they are very familiar with the charac-
ter of the men engaged in the same line of business. In fact,
they are in possession of detailed information in regard to the
moral integrity and financial standing of men who are at the
head of large manufacturing plants and business concerns.
Only those who can pass the scrutiny of the advisory committee
are admitted as members of the exchange. As a consequence,
it is quite true that the moral hazard in these inter-insurers
aIssociations is reduced almost to a minimum.
As a summary it may be said that the strong points in favor
of these inter-insurers associations a-re (1) a limited expense,
(2) a thorough inspection of risks, and (3) a reduction of the
moral hazard to a minimum. Consequently, these inter-insurers
have brought about great savings to their subscribers, and it is
not uncommon to find that they have returned a very large part
of the original deposits to the subscribers.
Some of the later exchanges are open to criticisms owing to
the fact that they are really promoted by the attorney-in-fact.
IHe organizes a stock company to promote the exchange and then
transfers his commission to this company and receives in return
a salary from the incorporated concern or his equitable share of