This section is from the book "Practical Real Estate Methods For Broker, Operator & Owner", by Thirty Experts. Also available from Amazon: Practical Real Estate Methods for Broker, Operator, Owner.
And now as to how these specific rates are made. Before a new rate is published, an inspector from the Exchange visits the property and makes a careful inspection of the entire building. From his report the rate is computed on the proper schedule blank. There are over 25 forms of schedule in use by the Exchange, each form being used for its respective class or classes. It might be well to explain that these schedules are our yardsticks for measuring various classes of properties. Our experience gives the fire cost of a general class, and this for the sake of illustration we will call the length of our yardstick. This is divided into parts, each representing the different features which contribute to the fire loss of the class. This yardstick is then used to measure the individual buildings of the class and to proportion accurately the insurance premium to each.
In the case of a store and dwelling rated because of a hazardous occupant, the schedule is rather simple, containing possibly only two or three charges. The other schedules are more complex, and to understand fully the reason and effect of the various charges in the schedule on a large mercantile or manufacturing establishment requires some little experience. The schedule blank used to rate a mercantile building contains over no items. These items measure: (1) The features of building construction, such as walls, roofs, mansards, floors, ceiling and side wall finish, area, height, elevators, stairways, well holes, dumb waiters, vent shafts, skylights, cornice, lighting, heating, chimneys, frame extensions, stone piers, iron columns, fireproof floors, features of mill construction, etc.; (2) hazards of occupancy, which include the number of tenants and number of operatives; (3) fire appliances, such as automatic alarm, chemical engines, buckets, standpipes, watchman and clock, fire escapes; (4) exposure from surrounding buildings; (5) housekeeping features, such as stove-pipes, coal and gas stoves and gas jets and any unsafe heating or lighting appliances, packing material, broken plaster, benzine, lack of waste cans, untidy floors, unsafe heating apparatus, etc.
You will see from this that in determining the insurance rate to be charged, every effort is made to give consideration to the various features, good or bad, which affect the fire cost.