Barn raising is a collective action of a community, in which a barn is built or rebuilt by members of the community. In many respects this could be considered a precursor of property/casualty insurance, wherein the insureds pay a modest annual fee with the expectation that the combined contributions, cash or in kind, of the member group will create a pool that will cover a large loss experienced by an individual. Barn raising was particularly common in 18th- and 19th-century rural North America.
Today, this communal approach has largely been replaced by the property/casualty insurance industry. The insureds pay periodic premiums so that the insurance company can recognize the claims of the few from the cumulative payments of the many.
Investors should be aware that this is a highly regulated business with most states regulating rates (premiums) through an insurance commission or other, similar, politically appointed entity.
As the cost of repairing a home, vehicle or other property rise, rates have to follow suit. At the end of the day, insurance companies can only pay claims to the extent that the insureds pay appropriate premiums.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA