Page:The New International Encyclopædia 1st ed. v. 07.djvu/706

* FIRE INSURANCE. 0-42 FIRE INSURANCE. terests of the agent on the one hand and those of the insurer and insured on the other, are very serious evils necessarily involved in the agency system. Associations of Underwriters. The tendency to association on which the business of insurance is based is manifested in the formation of all sorts of unions and associations among those engaged in it. In the department of fire insur- ance these associations are especially numerous, and have attracted much attention through the obvious attempts of some of them to replace competition by mutual agreement as a regulator of rates. There are in the United States more than thirty general associations of fire under- writers, some of them extending over many States, besides a considerable number of local associations, each confined to a particular city. Many of the forms of activity of these associa- tions are universally recognized as legitimate. As examples of such activities may be mentioned the offering of rewards for the apprehension of incendiaries, the inspection of fire departments and water-works, and the organization and sup- port of fire patrols. Anti-Compact Laws. It is the attempt of the underwriters' associations to regulate rates and thus restrict competition which has attracted the most attention. The popular feeling has undoubtedly been that the rate agreements en- tered into by nominally competing companies through underwriters' associations have resulted in keeping premium rates illegitimately high. The discussion of the question how far competi- tion affords a desirable regulator of rates in the insurance business belongs in the treatment of the general subject of insurance. It is of imme- diate interest at tnis point to notice the legis- lation against rate agreements which several States have enacted in recent years. Such laws are known as anti-compact laws. The earliest one was passed in Ohio in 1885. This law pro- hibits not only agreements as to the rates to be charged for insuring against loss by fire, but even agreements as to the commissions to be paid to agents for securing business. Similar laws. so far as the control of rates is concerned, arc now in force in ten States besides Ohio — viz. Alabama, Georgia, Iowa. Louisiana. Michigan, Nebraska I declared unconstitutional by the Unit- ed States District Court, but in force pending an appeal), New Hampshire. South Carolina, Washington, and Wisconsin. In four other States — viz. Arkansas, Kansas, Missouri, and Texas — such combinations are specifically included among those prohibited by general anti-trust laws. The anti-compact movement apparently reached its height in the yens 1897-99, no fewer than eight of the fifteen laws in force having been passed during thai time. In 1900 only one such law ■was passed, and none in 1901. In 1902 Virginia repealed the law which she had enacted in 1899. It is coming to be recognized that the attempt to prevent rale compacts by prohibitory legisla- tion eannoi succeed, owing to the ease with which secrel agreements can be entered into, and it i- coming to be suspected thai the condition of reckless underwriting which prevails when compacts are actually abolished may be a wi i evil than the relatively high rates maintained by means of t he agreements. I'ii lTIO "i lsnn(i; to AMOUNT OF LOSS BY F] I REASE IN' NUMBI R OF FlBl S ' >« [NG to Insurance. The relation of insurance to the amount of fire loss deserves careful considera- tion. Over against the great gain which the system of fire insurance confers upon society must be set a direct loss due to the increase in the amount of property destroyed by fire as a result of the insurance itself. A part of this increased loss is due to the greater carelessness of the owners because of the insurance; a larger part is due to the deliberate destruction of in- sured property by the owners for the sake of se- curing the insurance. What proportion of fires is due to incendiarism it is impossible to deter- mine with accuracy. Various estimates, ranging from 20 to 40 per cent., have been made by different investigators. If fires of unknown ori- gin are largely counted as incendiary, as there is a natural tendency to count them, the proportion is made unduly high. In Massachusetts, for a period of seven years just preceding the first ap- pointment of a State fire marshal, which occurred in 1894, incendiary fires and those of unknown origin combined constituted 33% per cent, of the total number of fires. The proportion in most States is undoubtedly higher. It must be borne in mind, however, that by no means all incen- diary fires are set for the purpose of obtaining insurance. In Massachusetts, for example, in the four years for which statistics are available —viz. 1896, 1897. 1900, and 1901— out of a total of 1264 incendiary fires, only 408, or 32 per cent., were set for the insurance. During the same years incendiary fires constituted 7.1 per cent, of the total number of fires in the State. The percentage is undoubtedly higher in other States. The value of the property deliberately destroyed in order to obtain insurance consti- tutes one element in the cost of insurance. The insurance companies themselves are indirectly responsible for a part of this loss. It is a mat- ter of common knowledge that agents and brokers show too great laxity in granting insurance on property up to. and sometimes far beyond, its full value. Every instance of over-insurance is a standing invitation to incendiarism. The ex- tent of it is one of the unfortunate results of the zeal of local agents for business and commissions. Preventive Activity op Insurance Compa- nies. While a part of the annual loss by fire must be charged against the system of insurance, insur- ance companies must, on the other hand, be cred ited with a large share of the responsibility for the discovery and application of methods for preventing such loss. Not only have they always been active both in the adoption of preventive measures and in compelling or inducing (lie in- sured to adopt such measures, but it is also to their initiative that a large part of the progress in State and municipal activity along the -Mine lines has been due. As an example of direct preventive activity by fire-insurance companies themselves may be mentioned the maintenance of tire brigades and lire patrols. The early Eng li-h companies laid great stress on the value of their services in extinguishing fires. Companies of 'watermen,' organized for this purpose, were supported* at first by the individual companies, and later by associations among the underwriters, It was imt until 1866 that the maintenance and control of the London tire brigades passed from Hie bands of the underwriters to (he municipal! ties. The English companies still support 'aaJ •I rps,' whose duty it is to protect property