Two venerable insurers flourish in their special niche

The City of Brotherly Love is showing off its many firsts this year.

And two Philadelphia insurance companies are touting their status as the most senior of citizens in their industry.

The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire and the Mutual Assurance Company for Insuring Homes from Loss by Fire, founded in 1752 and 1784, respectively, are distinguished by their long lives and their equally long names.

Though somewhat dwarfed by nine bigger insurers in the same city, these two elders have carved themselves a special niche: They still offer ''perpetual'' fire insurance, a once popular but now quite unusual type.

Sold by only six companies in the US today, perpetual insurance allows an individual policyholder to become a member of a mutual company. For instance, one deposits, say, some 2 percent (for brick homes) or 2.25 percent (for wood frame homes) of the amount insured, considerably more than normal home insurance. One's home is thereby insured in perpetuity (or until the home is sold or the money withdrawn) up to the amount specified against fire damage. Regular insurance covers other risks, such as theft, but at reduced cost because perpetual insurance covers fire risk.

The depositor receives dividends voted annually by the insurer's board of directors. If he drops the policy after some years his deposit is returned in full.

The Contributionship pays a dividend of 5 percent for the first five years, 10 percent for the next five years, and 20 percent if a policy has been outstanding for more than 10 years.

Jean Miller, vice-president and corporate secretary of the Mutual, points out that the long-term average yield of these dividends is higher than that of comparable conservative investments.

It was Benjamin Franklin who suggested that Philadelphia's Union Fire Company and seven other volunteer fire departments -- which were really more like philanthropic and social organizations -- get together to form what is today the Contributionship.

Thirty-two years later, some members who disagreed with the company's discriminatory practice of refusing to insure homes surrounded by trees formed the Mutual.

The Mutual, often called ''The Green Tree,'' introduced its first perpetual fire product in 1801, and the Contributionship, known as ''Hand-in-Hand'' soon followed suit.

Both companies have grown steadily over the past 2 1/2 centuries, with very high margins and very low loss ratios.