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Originally appearing in Volume V14, Page 665 of the 1911 Encyclopedia Britannica.
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INSURANCE, a term meaning generally "making oneself safe against " something, but specially used in connexion with making financial provision against certain risks in the business of life. The terms Assurance and Insurance are in ordinary usage synonymous, but in the profession " assurance " is con-fined to the " life " business, and " insurance " to fire, marine and other miscellaneous risks. Assurance was the earlier term, and was used of all forms of insurance indiscriminately till the end of the 16th century. Insurance—in its earlier form, " ensurance "—was first applied to fire risks (see note s.v. " Insurance " in the New English Dictionary). I. GENERAL HISTORY During the latter half of the 19th century the practice of insurance extended with unprecedented rapidity, partly in novel forms. While its several branches, such as life insurance, casualty insurance and others, have each had an independent and characteristic development, all these together form an institution peculiar to the modern world, the origin and growth of which attest a remarkable change in men's ideas and habits of thought. The simplest and most general conception of insurance is a provision made by a group of persons, each singly in danger of some loss, the incidence of which cannot be foreseen, that when such loss shall occur to any of them it shall be distributed over the whole group. Its essential elements, therefore, are foresight and co-operation; the former the special distinction of civilized man, the latter the means of social progress. But foresight is possible only in the degree in which the consequences of conduct are assured, i.e. it depends on an ascertained regularity in the forces of nature and the order of society. To the savage, life is a lottery. In hunting, rapine and war, all his interests are put at hazard. The hopes and fears of the gambler dominate his impulses. As nature is studied and subdued, and as society is developed, the element of chance is slowly eliminated from life. In a progressive society, education, science, invention, the arts of production, with regular government and civil order, steadily work together to narrow the realm of chance and extend that of foresight. But there remain certain events which may disturb all anticipations, and in spite of any man's best wisdom and effort may deprive him of the fruits of his labour. These are mainly of two classes: (I) damage to property by the great forces of nature, such as lightning and hail, by the perils of the sea and by fire; (2) premature death. A useful life has an economical value. But no skill can make certain its continuance to its normal close. In the reasonable expectation that it will last until a competence is gained or the family ceases to be dependent, young men marry; but some will die too soon, and in the aggregate multitudes are left destitute. Both classes of loss are alike, in that they fall on individuals in the mass who are not known beforehand nor selected by any traceable law. But the sufferers are ruined, while the same pecuniary loss, if distributed over the whole number, would be little felt. Wherever the sense of community has existed this has been discerned, and some effort made to act upon it. Thus in feudal Europe it was customary for the houses of vassals to be restored after fire at the cost of the estate. In England in the 17th century the government practised a method of relief after accidental fires. When such a loss was proved to the king in council, the chancellor sent a king's brief to churches, sheriffs and justices, asking contributions, and trustees for the sufferers administered the funds collected. But under the last two Stuarts gross frauds resulted, and the system fell into disrepute and disuse. At best, the voluntary relief provided by charity after losses are incurred is but sporadic and irregular. Insurance begins when the liability to loss is recognized as common, and provision is made beforehand to meet it from a common fund. The efficient organization of communities or groups for this purpose is an essentially modern achievement of social science. But the history of the conception in its formative stages is extremely obscure. Its first appearance in business life is often sought in the marine loans of the ancient Greeks, fully described by Demosthenes. Money was advanced on a ship or cargo, to be repaid with large interest if the voyage prosper, but not repaid at all if the ship be lost, the rate of interest being made high enough to pay not only for the use of the capital, but for the risk of losing it. Loans of this character have ever since been common in maritime lands, under the name of bottomry and respondentia bonds. (See below, Marine Insurance.) But the direct insurance of sea-risks for a premium paid independently of loans began, as far as is known, in Belgium about A.D. 1300. During the next century the risks of insurance for the usual voyages between London and European ports were carefully considered, and customary rates became established. In his address in opening Elizabeth's first parliament in 1559, Sir Nicholas Bacon said, "Doth not the wise merchant in every adventure of danger give part to have the rest assured ?" In 16or parliament created a commission to decide disputes under contracts for marine insurance, and the preamble of the act (43 Eliz. ch. 12) expresses the best thought of the British mind in that day upon the subject. Thus the business of marine insurance was intelligently and wisely practised three centuries ago. But the under-writers were private persons, acting independently, so that the insured lacked the benefit of large aggregations of capital to make his contract safe; while the insurer, who took one or a few risks, was without the security of large averages and might be crushed by an exceptional loss. A partial remedy was gradually reached in London. Men who had capital to employ in this hazardous business used to meet at fixed hours when shipowners and merchants could negotiate with them. The higgling of the open market, in view of all the circumstances of each risk—as the character and condition of the ship, its crew and cargo, the length and route of the voyage, the season, the current rate of interest and profits—determined the rate of premium; and when this obtained general assent, the written agreement was signed by each underwriter for that part of the risk which he assumed. Towards the end of the 17th century these meetings were held in Lloyd's coffee-house, and their simple practice graduallygrew into the complete and complicated system of marine insurance now general. The underwriters together evolved rules and improved methods, but continued for generations to insure severally, without corporate powers or common responsibility, so that the name Lloyd's became throughout the commercial world the symbol of marine insurance. More recently the name has been adopted in the United States by associations of private or individual underwriters as distinguished from insurance corporations. Although the underwriters at Lloyd's often considered and assumed other than marine risks, and made contracts some of which were merely wagers on public or private events, there is no record of insurances by them against fire on land. But fire insurance, it is vaguely known, had previously been practised, in a crude form, in several European cities. In 1635, and again in 1638, citizens of London petitioned Charles I. for a patent of monopoly to insure houses at the rate of one shilling yearly for each £2d of rent, the association to repair or rebuild those burned, to maintain a perpetual fire-watch in the streets, and to pay £200 yearly towards rebuilding St Paul's cathedral until finished. The attorney-general approved the project, but in the disorders of the kingdom it was forgotten. The Great Fire of 1666 revived interest in the subject, and led to practical measures. In May 168o a private fire office was opened "at the back side of the Royal Exchange" to insure houses in London, by assuming the risk of loss to a fixed amount for a fixed premium, namely, 21% of the yearly rent for brick houses and 5 %o for frame houses, the rent being always assumed to be one-tenth of the value of the fee. The estimates of the promoters are interesting. In the fourteen years since the Great Fire 750 houses had been burned in London, with an average loss of £zoo. A fund of £40,000 subscribed as guaranty was to be increased by £20,000 for every ro,000 houses insured, and the interest of the fund alone therefore might be expected to meet all losses and leave a surplus. Thus the security was perfect and the promise of profit great. Meagre as was the basis of facts for the calculations, and crude as was the statistical method employed, the insurance offered met a general want and the business grew rapidly. Within a year a strong demand was heard that the city of London should itself insure the houses of its citizens, and the common council voted to do so at lower rates than the fire office. But the courts put a speedy end to this movement, holding that the charter conferred on the city no power to transact such business. Thus the socialistic theory that insurance is properly a branch of government is almost as old as the business itself, though it has never found favour or been practically tested on a large scale in Great Britain or America. The next notable step in the evolution of modern methods was the organization of mutual insurance associations. In 1684 the Friendly Society was organized. Each member paid a small entrance fee for expenses, made a cash deposit as a reserve for emergencies, to be returned at the end of his term, and agreed to meet equitable assessments for current losses. Payments were computed on the assumption that one house in 200 is burned every fifteen years. The rivalry between the proprietary and the mutual systems began at once, and has continued till now. In 1686 "the Fire Office at the back side of the Royal Exchange" petitioned for a patent of the fire insurance policy and a mono-poly of its issue for thirty-one years. The Friendly Society opposed the grant. The most eminent lawyers for both were heard by the king in council, and on the 3oth of January 1687 King James II. decided the case. No charter was granted, but the Fire Office might continue its business, having a monopoly for one year. Thereafter the Friendly Society might for three months sell policies, but must then suspend for three months, and so on for alternate quarters. But the Fire Office must pay the ordinance service for its work in extinguishing fires, the amount to be fixed for each fire by the king. This was the first appearance of the plan, so widely prevalent in after years, of imposing on insurance companies the support of fire departments; that is, of taxing the prudent who insure to protect the reckless who do not. After i688 the atmosphere of England was freer, and under-writing was soon practised without special licence In 1704 the societies began to insure household goods and stocks in trade, and the insurance of personal property rapidly became as important as that of buildings. In 17o6 the Sun Fire Office was founded, and began to issue policies on both real and personal property in all parts of England. Other associations arose in quick succession of which the Union Fire Office, dating from 1714, and the Westminster from 1717, still survive. Before 1720 both fire and marine insurance had become general in all great centres of trade. But life insurance was as yet hardly conceived. Sporadic evidences that it was needed, and that men were feeling after it, occur in very early records. It was a medieval custom to advance to a mariner goods or money, to be restored with large additions, but only in case of safe return; or to contract, for a sum in hand, to ransom him if captured by pirates; or to pay a fixed amount to his family if he were lost. To evade the usury laws life annuities were often sold at a low rate, redeemable for a stipulated sum Life estates were sold upon some guess at their probable duration; and leases, especially of church lands, were made for one, two or three lives on rude and conventional estimates of the time they would run, Thus there was a commercial and social pressure for some intelligent method of valuing life contingencies. But the direct insurance of life, as a means of reducing the element of chance in human affairs, was hardly thought of. Indeed, such contracts were commonly regarded as mere forms of gambling, and were prohibited in France as against good morals The earliest known policy of life insurance was made in the Royal Exchange, London, on the 18th of June 1583, for £383, 6s 8d. for twelve months, on the life of William Gibbons. Sixteen underwriters signed it, each severally for his own share, and the premium was 8 % The age of the insured is not referred to, nor was it then considered, except when far advanced, in fixing the premium, Gibbons died on the 29th of May 1584. The underwriters refused to pay, alleging that twelve months, in law, are twelve times twenty-eight days, and that Gibbons had survived the term. The court, of course, enforced payment. A few instances of similar contracts are found, mostly in judicial records, during the 17th century; but every such transaction was justly regarded as a mere wager, at least on the part of the insurer It could not be otherwise until the principles of probability and the uniformity of large averages were understood and trusted A few great thinkers were groping for principles which were profoundly to modify the practical reasoning of after-generations. But their work first obtained wide recognition upon the publication of the Ars Conjectandi, the posthumous treatise of Jacques Bernoulli, in 1713. Meanwhile the social need for insurance continued to express itself in empirical efforts, which at least helped to make clearer the problems to be solved. Thus in 1699 "The Society of Assurance for Widows and Orphans" was founded in London, a crude form of what is now called an assessment company. Each of 2000 healthy men under fifty-five years of age was to pay Ss. as entrance fee, is. quarterly for expenses, and Ss. at the death of another member; and at his own death his estate should receive £Soo, less 3%. On default in any payment his interest was forfeited. The society lasted about eleven years, and the accounts of its eighth year are preserved, showing the payment of £5200 upon twenty-four claims The economic significance of this society lies in its distinct recognition of the principle of association for the distribution of losses. Together with the Friendly Society, it shows that this principle had now been so widely grasped by business men that, when embodied in a practical venture, it found substantial support. The conception of a corporation as an artificial person to hold property and support obligations uninterrupted by the death of individuals was found in Roman law and custom. Its first use in modern business enterprise was perhaps the Bank of St George in Genoa, about A.D 1200, a joint-stock company with transferable shares, whose owners were liable only to the amountof their shares. In England the crown, itself the chief and type of corporations sole, was the source of chartered rights, and from about 1600 the principle steadily gained recognition, the advantages of incorporation being attested by the successes of the great trading companies. Experience showed that the corporate form was the obvious remedy for the chief difficulties in the practice of insurance. Single risks were but speculative wagers; a great number must be taken together to obtain a trustworthy average. A larger capital than an average private fortune was demanded as a guaranty, and this capital must not be exposed to the dangers of trade, but set aside for the special purpose. Individual underwriters may die or fail; only a permanent institution can be trusted in long contracts Several projects were devised on this basis. Early in the 18th century, indeed, the English government refused a charter for marine insurance, declaring that corporate insurance was an untried and needless experiment, while private underwriting was satisfactory and sufficient But zn 1720, when two sets of promoters offered £300,000 each for a charter, exclusive of other associations though not of individuals, to insure marine risks, parliament chartered the Royal Exchange and the London Assurance Company with a monopoly to this extent. The business disappointed its projectors at first, and the government accepted half the price rather than revoke the grant. In 1721 the companies extended their operations to fire insurance throughout England. Thus the principle of insurance had now become a distinct part of the common stock of thought in enlightened nations, and gradually, by association with successive new ideas, plans and methods, was developed into a business or trade, which before the middle of the 18th century already formed an essential element of the social scheme. Most of the modern forms of insurance against the elements were known, and at least crudely practised. But there was no scientific basis for the business. Premiums were fixed, not by computation from known tacts or reasonable assumptions, but by guess and the higgling of the market. Only the competition of capital checked the extortionate demands of underwriters. The first important steps towards a scientific valuation of hazards were taken in dealing with the class of risks hitherto so much neglected, those which depend upon human mortality: Marine and fire insurance had their origin in the pressure of need. The practice began before a theory existed. But life insurance had its origin in the scientific study of the facts of human mortality. Both marine and fire insurance became general before there was any intelligent study of the risks by statistical or mathematical methods, nor can it be said that much progress has since been made towards establishing a scientific basis for the valuation of risks in these classes. But life insurance may be said to have been impossible until the theory of probabilities had become a recognized part of the common stock of ideas. The value of insurance as an institution cannot be measured by figures. No direct balance-sheet of profit and loss can exhibit its utility. The insurance contract produces no wealth.. It represents only expenditure. If a thousand men insure themselves against any contingency, then, whether or not the dreaded event occurs to any, they will in the aggregate be poorer, as the direct result, by the exact cost of the machinery for effecting it. The distribution of property is changed, its sum is not increased. But the results in the social economy, the substitution of reasonable foresight and confidence for apprehension and the sense of hazard, the large elimination of chance from business and conduct, have a supreme value. The direct contribution of insurance to civilization is made, not in visible wealth. but in the intangible and immeasurable forces of character on which civilization itself is founded. It is pre-eminently a modern institution. Some two centuries ago it had begun to influence centres of trade, but the mass of civilized men had no conception of its meaning. Its general application and popular acceptance began within the first half of the loth century, and its commercial and social importance have multiplied a hundred-fold within living memory. It has done more than all gifts of impulsive charity to foster a sense of human brotherhood and of common interests. It has done nfore than all repressive legislation to destroy the gambling spirit. It is impossible to conceive of our civilization in its full vigour and progressive power without this principle which unites the fundamental law of practical economy, that he best serves humanity who best serves himself, with the golden rule of religion, " Bear ye one another's burdens." II. CASUALTY AND MISCELLANEOUS INSURANCE Before proceeding with an account of the standard institutions of fire and life insurance, it is proper to glance at the modern vast extension of casualty insurance, and to notice certain novel applications of the insurance principle to other special classes of events. The novelty of these enterprises, however, is not in the general idea underlying each of them. In almost every instance in which insurance has been extended, so as successfully to cover new kinds of risks, it will be found that the suggestion is nearly as old as the practice of life insurance. Many more kinds of insurance than are even now found useful were attempted more than a century ago. But no statistical basis then existed for determining the probability of loss from various casualties, nor had the methods of canvassing, accounting, proving and checking losses, reached the perfection now recognized as necessary for efficiency and safety. The various branches of business which, in distinction from the great standard institutions of life, fire and marine insurance, are commonly treated as miscellaneous insurance, differ widely in their subjects and methods. The most general of them, and that most widely known, is insurance against personal injury by accidents of every kind. Much has already been done by the companies in collecting and analysing facts, so as to determine the average risk of injury and disablement among different classes of men. But there is as yet no such union of effort among them to combine their resources for such purposes as among the life companies, nor does the subject admit of treatment so exact as that of human mortality. Hence it is impossible to speak of a theory of accident insurance in a scientific sense; and in its practice premiums and necessary reserves are determined by the trained business judgment of individual managers rather than by the calculations of actuaries from statistical collections of facts. The insurance of railway travellers against injury upon trains was the first form of accident insurance which proved widely acceptable. This is still practised as a special business by several companies, tickets, entitling the purchaser or his family to a fixed compensation in case of his injury or death, being offered for sale with the railway tickets. But the development of insurance against personal injuries, which is most characteristic of the times, is the wholesale insurance of the employer against liability to the employed for accidental injuries sustained in his service. This was first undertaken on a large scale by the " Employers' Liability Assurance Corporation of London," founded for the purpose in 188o, immediately after the passage of the Employers' Liability Act by parliament, which made employers of labour liable for injuries sustained in their service to an extent unknown to the common law. The Workmen's Compensation Act 'cob greatly extended the classes of employers liable for accidents to their servants, and the number of companies devoting themselves to accidents and workmen's compensation has greatly increased, while practically every fire insurance office has taken up the business. The policies are issued to employers of labour, agreeing to indemnify them for any loss to which they may be subjected, at common law or by statute, in consequence of bodily injuries suffered by any employee while engaged in their service. In some cases the insurance company undertakes the investigation and settlement of each claim within the limits prescribed by the policy, and conducts any litigation which may result. The adjustment of damages can be made with more economy and skill by the companies than is usually possible for the employer, and the danger of fraudulent claims is largely reduced by methods experience has taught them. The price charged for such insurance is either a small percentage of the aggregate wages paid during the term, or a standard rate for each particular class of employment,or (in the case of large employers of labour) an " all-round " rate designed to cover every class of employee. The most common form of accident insurance, however, is still represented by the policy which promises the assured a fixed sum in case of death by accident, and a weekly compensation during disability from such a cause. Many policies also specify a sum to be paid for the loss or permanent damage of a member, as an eye, a hand or foot. Another extension of the personal accident policy is the addition of some form of health insurance, especially the grant of a weekly sum to the insured during incapacity for work caused by certain named diseases. Besides the ordinary joint stock companies which carry on this class of business with fixed premiums, many associations organize for insurance against personal injury by accident, relying upon the assessment of members to pay claims as they mature. Many of these are local and ephemeral; but a number of them, formed by men engaged in common pursuits, for mutual protection, have attained importance. Such are especially some of the commercial travellers' and the railway employees' accident associations, and a few connected with the Masonic or similar beneficiary orders. Another large class of casualty insurances applies to various forms of damage to property. The branch which seems most to have attracted promoters is the insurance of plate glass against fracture, which is carried on by a number of companies in Great Britain, and is the only business of several of them. In the United States there are five corporations which insure plate glass alone, while many other casualty companies issue also policies on glass. This business is not conducted in any other country upon so large a scale as in the United States, but is attracting more attt:nticn than heretofore in Europe, and especially in Great Britain. There are several companies in the United Kingdom and in America which make the insurance against damage by the explosion of steam boilers a special feature of their work, but by far the greater part of the business is transacted by one company in each country. The service rendered is one of special skill and vigilance, extending far beyond the contract for indemnity. The company, in fact, employs inspectors of the highest scientific qualifications, who assume constant supervision of the machinery, and require. its structure and conduct to be freed from elements of danger. It is prevention rather than compensation that is sought, and the outlay made by the companies is mainly for inspection and control, not for losses. It is usual to promise in a policy upon a steam boiler some compensation also for any personal injury which may result from an explosion. There are some companies in England having insurance against burglary for their principal purpose, while several of the British and American accident companies issue policies of this kind. It is some-what of an experiment, and the risks taken are for moderate sums, at premiums determined in each case by an estimate of the danger founded on a study of all the circumstances. There is no information published concerning this branch of insurance in other countries, but the aggregate premiums paid are not at present very large. It is believed by many that there is an important future for burglary insurance, in connexion with improved methods of protection, by safes, automatic alarms and constant inspection, for dwelling-houses, shops and offices, which are often unoccupied. Insurance against damage to growing crops by hail is practised in several parts of Europe and America, commonly by small local associations on the mutual plan or as an incident to the business of fire insurance. No statistics can be obtained of these operations. The same is true of the insurance against the ravages of tornadoes, and against sickness and accident in domestic animals. A wholly distinct business, commonly classed as a branch of insurance, has now grown to great importance, that of guaranteeing the fulfilment of contracts and of indemnifying employers against defalcations in their service. The bond of a corporation of large capital is widely taking the place which personal surety has filled in connexion with undertakings on contract, and with offices and occupations of trust, both in public and in private life. Fidelity insurance is carried on by a few of the general casualty companies, but as the practice of it extends it becomes more and more the work of special institutions organized for this purpose alone. In the United States there are many corporations of excellent standing, with aggregate paid-up capital of more than $15,0oo,00o and surplus funds of nearly $lo,000,000 more, and collecting in premiums about $4,000,000 annually upon bonds and guaranties amounting to more than $1,250,000,000. The business practically only started at the close of the 19th century. It has had similar if not equal development in Great Britain and in several other countries, but it is only in the United States that the statistics of it are officially collected. The insurance of titles to real property is also becoming widely extended. This business, however, has indemnity for losses as but an incidental purpose. The principal aim is to furnish a final and responsible assurance that the title is flawless. Several of the companies in the United States possess elaborate and expensive collections of records, covering the sources of title for cities or large districts; all of them employ expert ability of a high order; and when they approve a title as perfect, the purchaser or lender of money may receive, with the approval, a guaranty against loss in accepting it, which private examiners or counsel cannot give. Titles are insured also in other countries, but the business has nowhere else attained such importance, nor do the institutions transacting it make full and separate statements of their accounts. Other minor forms of insurance are against bad debts, bonds and securities in transit, earthquakes, failure of issue, loss on investment, leasehold redemption, non-renewal of licences, loss of or damage to luggage in transit, damage to pictures, loss of profits through fire, imperfect sanitation, birth of twins, &c. The growth of the business of fire insurance since 1880 or thereabouts has been commensurate with the increase of wealth and of commercial activity in the foremost nations, while the practice of it has also become general in countries in which it was formerly little known, The statistics of the subject have in recent years become far more full and more accessible than formerly; partly because many governments require detailed reports of resources, receipts and expenditures from all companies permitted to establish agencies within their jurisdiction, and periodically publish summaries of the returns; but also largely because the companies seek the widest publicity as their best means of advertising. It is to be regretted that there is as yet no uniformity of method in these returns; while some of the most important elements of the subject are not sufficiently illustrated for the student in the published statistics. Many companies of the United Kingdom transact business throughout a great part of the world, and there is no means of determining how much of their receipts or their losses must be referred to Great Britain. Further, they fail to give classified amounts at risk, so that it is impossible to estimate with any confidence the total sum for which any kind of property, such as dwellings, factories, household goods, stocks of merchandise or wares in transit, is insured. The returns of the London Fire Brigade, however, which is in part maintained by regular contributions from the fire underwriters at the rate of £35 for each £i,000,000 of risks assumed by them within the metropolitan district, continue to exhibit a regular growth. The aggregate amount insured in the metropolis was reported as follows: In 1882 £696,715,141 1886 741,109,316 1890 806,131,385 1895 858,899, 409 1900 963,291,097 1905 1,034,819,587 It appears probable that the rate of increase here shown is not greater than the actual growth of insurable property during the same period, so that it may be reasonably supposed that the custom of protecting all exposed property by insurance was already general in London many years ago. But the transactions of the British fire offices have grown much more rapidly, and indicate that, outside of the metropolitan district, the practice of insurance has extended greatly. The returns show that there is a tendency to concentrate the business in the control of large capital and experience, for practically all the premiums received and losses paid were shared by thirty-one companies, although there are at the same time a greater number of corporations of foreign countries with agencies for fire insurance in the United Kingdom; but many of these do but a nominal amount of business, and twenty-three of them are exclusively or chiefly engaged in re-insurance. This tendency has been a marked feature in the later history of fire insurance everywhere. The companies which are now in the field are the survivors of tenfold as many projected enterprises which have failed. The records of about two thousand organizations for the purpose, in America alone, which have undertaken the work and disappeared within fifty years, show the dangers to which inadequate skill and capital are exposed. But a small proportion of these failures were the direct result of sweeping disasters, though about seventy of them followed the memorable fires in Chicago and Boston in 1871 and 1872. Many more, nearly one-half of the whole, have followed a short career, in which the helplessness of inexperience to compete with long training and complete organization was demonstrated. Many hundreds of these projects were mere speculations or even frauds from the beginning; and the better education of the community at large in the principles and methods of insurance has been the chief agent in checking such enterprises, aided by the stringent legislation of several countries and of the United States in America and by the criticism of the press. The difficulty of establishing a new joint-stock fire insurance company is far greater in the present highly perfected state of the business than formerly, and constantly increases. The reports of the state insurance departments in America show that less than one-eighth of the premiums are now collected by companies founded since 1880; and, except in districts remote from the principal financial centres, or mutual associations for special classes of hazards, new companies are not often formed. In Great Britain a consider-able number of new corporations are registered every year, with fire insurance among their professed objects, but almost always in connexion with some forms of casualty insurance, which appear to be practically the purpose in view. The reports of the fire business in the United Kingdom for recent years, as collected in Bourne's Manual, show that less than one-fourteenth of it is done by companies organized since 1870. Though new companies have been registered, usually several every year, the number actually transacting successful business has not increased since i880. Of the various British companies now recognized, the twelve smallest together collect but i %.of the premiums received by one of the largest, and the tendency to concentrate the business seems progressive. These facts are explained by the necessity of a vast basis of average and of a large capital for security, and still more by the increasing demand for a thoroughly trained and organized body of agents, able to protect their companies from fraud and imposition, and at the same time to compete for public patronage. The Mutual principle has a strong attraction for many insurers and projectors. When a large number of pieces of property, so distributed that a single fire cannot destroy a Mutual considerable proportion of the whole, are yet owned system. and controlled by persons who can fully trust one another, both for financial responsibility and for good faith, there may be no need of a large capital in hand, nor of much of the costly machinery required for general competition. A contract for the assessment on all the property of losses as they occur, at rates fixed by the estimated exposure, may form a safe basis for an association. The fixed payments may be limited to necessary expenses, with a moderate reserve for emergencies, all excess of collections to be returned to the insured. This simple conception of an insurance association, with such modifications as experience indicates, has been accepted for a time as ideal in almost every civilized community, and attempts are continually made to realize it, but in the vast majority of instances with complete failure as the result. Like every other product of human skill, insurance is, for the most part, best supplied to the market by those who make it their calling to produce it for gain. But while the mutual plan. has proved poorly adapted to the general service of the commercial world, in some communities, and especially among the owners of certain classes of property, it has achieved great and apparently permanent success. This is particularly true of manufacturing districts, in which numbers of mills and factories are exposed to peculiar danger of fire by the nature of their own operations. The best safeguard they can have is by employing great skill in the construction, arrangement and conduct of their works. A group of such properties, associated for the prevention of loss, is naturally stimulated to highest efficiency when the whole group undertakes to bear all losses which are not prevented, and thus every member has a strong interest in making the protection complete. It is in associations of this character that the mutual plan of fire insurance has rendered its greatest' services. The mutual plan has been widely adopted also in local associations for the insurance of dwellings and farm improvements, where the individual risks are small, and where technical classification and special safeguards against fraud are not considered necessary, often with the result of affording satisfactory protection at low rates. But the ratio of this part of the business to that conducted by joint-stock companies diminishes from year to year, even in the agricultural and rural districts of the United States. According to the reports of the insurance departments of the states, as summarized in the Spectator Company's Year-Book, more than half of the cash was distributed among many, without excessive expense and delay, premiums of mutual insurance companies are collected in even when all the subscribers were solvent, while a few good names, however useful in canvassing, were no guarantee of the responsibility the two manufacturing states of Massachusetts and Rhode of unknown associates. In 1896 the executive and legal authorities Island. of New York assumed a hostile attitude towards speculative schemes It is, after all, only within a very limited field that the mutual of this class, and indictments were found against a number of pro- principle can be adopted. The essential principle of fire insurance moters for falsely antedating constituent agreements. The bubble burst suddenly, and within three years more than one hundred of the is the distribution of loss. It does not aim, directly at least, Lloyd's disappeared. A few reinsured their risks or were merged in at the prevention and only in a secondary way even at the permanent companies, but the mass of them proved to have no minimizing of loss; but what it seeks to accomplish is that such substance. Four or five only of the best Lloyd s continue to issue losses shall not fall exclusively, and possibly with overwhelming fire policies within a narrow and special circle, but as a group they effect, on the owner of the property destroyed, but shall be borne no longer compete for general business. in easy proportions by a large number of persons who are all alike The rate of premium varies with the supposed risk, but certain exposed to the risk of a similar catastrophe. To work out the descriptions of property are specially and more elaborately equitable solution of such a problem an amount of technical rated. This has been done to a considerable extent by common skill and extended experience is required which few bodies or agreement amongst the offices, and the arrangements are known communities possess. Certainly, experience in Great Britain as the " tariff system," which requires here a few words of has shown that the one system of fire insurance which has explanation. contributed most to the public benefit is that which is conducted We may suppose the question to arise, What ought to be paid by joint-stock companies, offering to thq insured the guarantee for insuring a cotton-mill, or a flax or woollen mill, or a weaving of their capital and other funds, and looking to make a profit factory, or a wharf or warehouse in some large city? The by the business. In France, Belgium, Holland, Russia and experience of any one office scarcely affords adequate data, and Norway, also, the joint-stock plan is almost exclusively employed. a rate based on the combined experience of many offices has a Such an opinion must be qualified by observing that, under the greater chance of being at once safe and fair. The problem, fostering influence of the national and municipal governments, the indeed, is a more complicated one than what has been already mutual plan has reached an important development in Austria- said would indicate. The property to be insured may consist Hungary, Germany, Switzerland and Sweden. In all these countries, indeed, corporate enterprise on a large scale, in every branch of of several distinct buildings and the contents of them: one business, is of comparatively late growth, and mutual fire insurance building may be devoted to operations involving in a high degree was a familiar practice long before joint-stock companies entered the risk of fire ; in another the processes carried on may be upon this field of activity. The tendency in the large cities and more simple and safe; a third may be used only for the storage commercial centres is to throw new insurances into the business cor- porations, while the time-honoured mutual associations retain their of materials having little tendency to burn. Fairly to measure standard character and customary clientage. But in these countries these various hazards it has been found necessary that the the mutual plan has an established place in the confidence of the rural experience and skill at the command of many companies shall population, who are generally strongly prejudiced against moneyed be combined, and that the rates shall be the result of consultation corporations. This is especially true of the cantons in Switzerland and a common understanding. and certain districts in Austria-Hungary, where fire insurance is administered by the local governments in connexion with a minute Now it is clear that no office will contribute its skill and police supervision of the construction of buildings and of other con- experience to such a common stock if the effect is to be that other ditions affecting the risk. From the published returns of the corn- offices may avail themselves of the information in order to panies and the authorities, as collected for the Post Magazine undersell it. Consultation about rates and a common under-Almanack (1900), it would appear that of all the fire insurance premiums paid in Switzerland nearly 54 % is collected by the standing necessarily involve a reciprocal obligation to charge mutual associations and the cantonal authorities; while in Italy not less than the rates thus agreed on; in other words, a tariff 37 %, in Germany 27%, in Sweden 27% and in the Austro- of rates is developed to which each office binds itself to adhere. Hungarian monarchy 20 % go to mutual companies. The system tends to restrain and moderate the competition for The earliest plan of insurance which was successful as a business which inevitably and to some extent properly exists business was that practised at Lloyd's Coffee-house (see LLOYD'S) among the companies, and its value to them is manifest. But Lloyd's. in London, and there applied almost exclusively to it is also of service to the insuring public. At first sight it might marine risks. Although the association known as seem that free competition would suit the public best, and that Lloyd's has been for generations a strong financial institution, a combination among the offices must tend to keep up rates, with every modern safeguard, and since 1871 has been a chartered and to secure for the companies excessive profits, but a little corporation with large funds, yet its name has become accepted consideration will show that this is a mistake. as the symbol of the primitive practice of combined underwriting It is an unquestionable truth, though one often lost sight of, by individuals, each upon his own credit, for a share of the risk that all losses by fire must ultimately be borne by the public. and without common liability. The insurance companies are the machinery for distributing A few associations on this general principle were known to exist in these losses, nothing more. If the losses fell on them, their funds, America, and to issue fire policies on a small scale, before 1892, but large they would speedily be exhausted, and the service chiefly for mutual insurance. In that year, in a general revision of as are, the insurance law of New York, such associations already in exist- which they render to the public would come to an end. To ence were expressly exempted from all its provisions. Speculators those who require insurance against loss by fire it must be a at once discerned an opportunity. If a company by omitting to take manifest advantage that they should have many sound and corporate form could carry on the business free from all restrictions and burden of state supervision, it would compete at great advantage prosperous offices ready to accept their business, and no less able with the insurance corporations. While the new law was in prospect than desirious to earn or to retain the public favour by fair and there was time to take action; and upon its passage there suddenly liberal conduct. A necessary condition of this state of things appeared a multitude of " organizations " claiming the exemption as is that the rates of premium paid for insurance should be - Llocd's, or associations of individual underwriters, and offering fire remunerative to the offices, and the main object of the tariff policies at rates materially lower than those of the joint-stock companies. Each of these was represented and managed by an system is to secure such remunerative rates. attorney for the subscribers, supposed to have power to bind them This it endeavours to do by two methods—by an agreement severally to the amount of their subscriptions. fhe standard policy as to what rates are to be charged, and by affixing such a penalty prescribed by law in New York was issued, with a clause making the to dangerous constructions, substances and processes as to liability several only, and fixing the amount. The Lloyd's entered the market with the zeal and prestige of a new idea and a great name, induce, if possible, a lessening of the danger. In other words, and they grew rapidly in number and in business, but made no and reversing the order, it seeks to diminish the risk of fire, and reports. Extending their agencies into other states, they occasioned to secure adequate payment for what risk remains. On the much litigation concerning their legal existence and rights and some supposition that the offices are correct in their estimate of risks, gash and inharmonious legislation. But several attempts to establish the ffect and indeed the intention, of similar Lloyd's in other places failed. Experience soon showed that their rule is not so much .it ivas impossible to enforce claims in the courts, when the liability to put money into their own coffers as to lessen the danger, and from all restrictions except those of the common law, as in Great Britain, and the competition of capital for profits is keen enough to keep the rates within reasonable limits. But in countries in which the government regulates the business in a more paternal spirit, and meddles with all its details for the avowed purpose of securing the safest and best public service, many difficulties arise. This is increasingly the case in several of the nations of Europe, notably in Austria, Switzerland and Germany. But it is in the several states of the United States that the government supervision of insurance has most interfered with and modified the natural development of the business. In recent years, beginning with 1885, sixteen of these states have enacted legislation, dictated by the growing jealousy of corporate powers and privileges, forbidding fire insurance companies or their agents to combine in any form for the determination of rates. Companies have often been indicted, fined and deprived of authority to issue policies because of member-ship in associations for the purely scientific purpose of ascertaining their average experience. The courts have frequently narrowed in their interpretations the sweeping intent of such laws, but have generally sustained them as within the power of the legislature, and at the present time there is an overwhelming public sentiment in large sections of the country arrayed against every semblance of union or consultation among the companies upon the basis of their business. In several instances all the important insurance companies have withdrawn their agencies at once from particular states, and the business community has been sorely distressed for want of their protection. But the popular prejudice has not yielded to its demand, and the companies have never been able to maintain their own position with unanimity, the temptation to secure a vast business upon any terms being always too strong for some of them to resist. This form of legislation has beyond dispute increased the cost of insurance to the people, while it has embarrassed and disturbed the regular work of the companies. Another pernicious tendency of popular legislation in the United States is found in the Valued Policy laws, the first of which was adopted by Wisconsin in 1874, providing that when any insured building is wholly.destroyed by fire the amount of the policy shall be conclusively taken as the amount of the loss. This principle, with various modifications and extensions, has become law in some twenty states of the Union, though in many of them its enactment has been vigorously resisted by the executive government; several governors have vetoed such bills, while most of the supervising officers have bad the intelligence to disapprove them. The provision is regarded by all insurance authorities as highly dangerous, inviting over-insurance and incendiarism; and there is no doubt that it has this tendency in many instances. But the statistics available, while showing that in general the rate of loss has increased where such laws are in force, do not demonstrate any such wide and ruinous stimulation of fraudulent practices as has been apprehended by thoughtful critics. The actual result is commonly to throw upon the insurer the responsibility for providing in advance against over-insurance by minute surveys and, in special cases, for continual watchfulness against depreciation. Like all other interference of government with private contract, however, it has a marked effect in increasing the difficulty and expense of business transactions. to save themselves in the first instance, and the owners of property ultimately, from the consequences of preventible fires. These rules, as will readily be seen, must have powerful influences on trade and manufactures. Many individual warehouses and mills are, with their contents, insured for very large sums, £10,000, £20,000, £50,000, £ioo,000 and more. An additional charge of 5s. or 1os. °f° in respect of a supposed increase of risk may mean a payment by the owner of several hundred pounds a year, and may operate as a complete veto on some arrangement or some machine which it might otherwise be desirable to resort to. The occurrence of a few severe fires in one town, followed by an increase of insurance rates, may have, and indeed has had, the effect of driving some branch of trade to another locality, the seat of greater caution or better fortune. It is therefore obviously desirable that so important an influence should be exercised, not precariously or capriciously, but according to the combined wisdom and experience of those associations which may he supposed to understand the subject best, and which obtain their experience in the way that makes it perhaps of most value, by paying for it. It is equally for the public benefit that rates of insurance should he fixed on some common scale. Suppose the system of unrestricted competition to be tried, the first effect will be a general and great reduction in rates. But it may be said, " So much the better for the insured; if the offices can afford this reduction of rate, it will only be a fair result of competition; if they cannot afford it, they will be the losers, but the public will gain; will the effect not be simply to reduce the rates to the paying point and no further ? " This would be all very well if the paying point could be absolutely ascertained or determined in any way beforehand, but the rate comes first and the losses come afterwards. In other businesses prices are based on some certainty as to the cost of production, but in selling fire insurance the cost is not known till after it has been sold. In a free competition it is the sanguine man's views which regulate the market price, and the rates therefore cease to be remunerative. The consequences are that some offices disappear altogether, others take fright in time to avoid ruin, though not to escape serious loss, persons who might establish new offices are deterred from doing so, the business gets the character of being a highly speculative and hazardous one, requiring extravagant profits to induce men to carry it on at all, and the public have to bear the cost. Unrestricted competition therefore is not for their advantage. The combination for uniform rates has another beneficial effect; it serves to distribute the burden of losses fairly. If it is a just thing that cotton-spinners should bear all the losses that arise in cotton-mills, and not leave them to be borne by the owners of private dwelling-houses, or vice versa, it is well that the loss by each class of risks should be measured fairly. But, while the experience of any one office, taken by itself, furnishes a very imperfect criterion, each contributes its quota of knowledge and experience to the common stock, and the public get the benefit both of broad and trustworthy data and of that peculiar and intimate acquaintance with each different class of property or process which the conductors of one company or another are sure to possess. No conventional or excessive rates can, however, be maintained for any length of time. Some member of the union is sure to perceive that popularity and profit may be gained by introducing a lower rate, if a lower rate is manifestly sufficient, or a new company starts into existence to remedy the grievance. It is to be remembered, too, that the directors and shareholders who control the offices are likewise insurers, quick to raise the question of how far the rates they have to pay as individuals are justified by the risks run; and if it cannot be shown that these rates are a true measure of the risk, offices are soon constrained by a sense of justice or by self-interest or by pressure from without to mitigate them. In short, the association is a union bound together by necessity and tempered by competition. Adequately to measure the risk of loss by fire demands not merely reference to an extended experience but a watchful regard to current changes. While the profits of fire insurance business fluctuate considerably from year to year, and seem even to follow cycles of elevation and depression, the tendency on the whole appears to be towards a growth of risk, although excessive competition among offices prevents the rates from rising in proportion. The Tariff system has steadily developed in minuteness of classification and in adaptation to wider experience, as well as to the changes in the character of many classes of risks by improvements in building and by the intro- duction of new kinds of goods and machinery. The estimates of risk and the determination of premiums are largely governed by individual opinion and by competition, no amount of experience furnishing a statistical basis on which trustworthy predictions of average loss can be made. Hence it is only by constant co-operation among insuring institutions in the exchange and combination of their observations that justice can be done to them and to the public. The proper extent of this co-operation is easily attained where the business is free The direction in which fire insurance as a social institution calls most pressingly for improvement is the extension of the principle of co-insurance. The importance of this Need of co- can only be understood by remembering that the fosuraece. aggregate losses of the community by fire are chiefly made up of innumerable small fires and not of sweeping conflagrations. The experience of every company confirms the general truth, that the number of fires in which a building is totally destroyed, or in which the loss amounts to the greater part of the property exposed under the same risk, is comparatively very small. It may be asserted with confidence that, in the grand aggregate of the business, much more than three-fourths of the loss occurs in fires in which less than one-tenth of the insurable value at risk is destroyed. The practical result is obvious. 11 fires destroy a million of dollars' worth in property insured for its full value, and a million's worth more in property insured for one-tenth of its value, the insurers will pay $1,000,000 upon the first group and more than $750,000 upon the second. But if all the insurance is taken at the same rate the insurers will have received premiums ten times as great on the former group as upon the latter. This rough illustration shows that in an equitable adjustment of rates the amount insured as compared with the value exposed is a prime element, and that premiums might justly form a scale, highest on the smallest fractious of Tariff difficulties. value, and diminishing rapidly as the percentage of insurance increases. Such a scale is, however, impracticable for many reasons, apart from the endless complications which, even if it could be constructed, it would introduce into the classification of risks. Any scientific plan of insurance, therefore, must provide another method for maintaining the proportion between amounts of premiums paid and the share in its benefits obtained for them. This is the purpose of what are generally called average or co-insurance clauses. The principle is, that when a proper rate for a class of risks is found, then the insured may protect at that rate any percentage of such a risk, and in case of fire shall be indemnified for the same percentage of his loss. When once clearly grasped, this principle largely simplifies and rectifies the business. It is in universal use in marine insurance under the name of " average," and is there recognized as indispensable. It is embodied in all fire policies in France, Germany and several other countries of Europe, and in 1826 was made compulsory in Great Britain by law in all " floating policies," those, that is, which cover stocks of goods distributed in several places and in fluctuating amounts. But it has not yet become general in Great Britain or America, although every writer of authority on the subject, and every practical underwriter of large experience, approves it. Systematic attempts have been made since about 1892 to extend its application in the United States with much success, but they have been met by strong opposition, which shows a widespread misunderstanding of its true bearing. The co-insurance clause, indeed, which has been generally approved by the American associations of underwriters; and applied in the great commercial cities, is less sweeping than the parallel agreements used in France and Germany. The latter regard the insured owner as self-insurer for the entire value at risk not covered by the policy, and grant indemnity only for that fraction of the loss which the amount insured bears to the whole amount exposed. The American clause is less logical, commonly providing that: " If at the time of fire the whole amount of insurance on the property covered by this policy shall be less than 8o% of the actual cash value thereof, this company shall . . . be liable only for such portion of such loss or damage as the amount insured by this policy shall bear to the said 8o%' of the actual cash value of such property." But this limitation of the basis of co-insurance average to 8o% of the total value is in perfect harmony with the conservative policy which seeks in all cases to prevent over-insurance. The most serious danger to which the entire system is open is that a fire may promise profit to the insured. To avoid this, it is a small enough margin to exclude from protection by the policy one-fifth of the estimated value, and to require the owner to assume that proportion of the risk. It is therefore reasonable not to require in any case a larger share than four-fifths to be covered, and not to press the co-insurance principle so far as to offer a differential advantage to those who insure above this limit. Thus, for practical purposes, and in the general mass of business, the 8o % clause may be accepted as approximately the best application of the principle. It makes possible substantial equity in distributing the cost, while it does not interfere with proper safeguards against over-insurance. The cordial support of the mercantile community in the great cities, and of the most intelligent state officers, has been given to it. A popular outcry has, however, arisen against all forms of co-insurance, on the superficial and mistaken assumption that in every case the principal sum named in the policy measures the insurance paid for by the premium; and that any limitation upon it must be a wrong to the insured, for the emolument of the insurance corporation. No less than ten states have passed laws prohibiting the clause within their jurisdiction, though Maine in 1895, after a trial of two years, repealed the prohibition. The law of Tennessee, a typical form, is as follows: ` Insurance companies shall pay their policy-holders the full amount of loss sustained upon property insured by them, provided said amount of loss does not exceed the amount of insurance expressed in the policy, and all stipulations in such policies to the contrary are and shall be null and void " (except in case of insurance upon cotton in bales). In several states the use of the co-insurance clause is made a penal offence. It is an interesting fact, however, that while this principle, whenever it has been generally applied, has led not only to a fairer equalization of premium rates, but, on the whole, to a marked reduction of them, the laws in question have deprived the people adopting them of the resulting benefit. In the year 1899 the average premium rate upon all fire risks written in the states in which co-insurance was wholly or partly prohibited was something more than $1.2o per $I000, while in the rest of the country, where the clause was permitted and to a large extent used, the rate was but 96 cents per $I000. The marked difference, which tends to increase, is a perpetual object-lesson which must in the end appeal strongly to the popular intelligence. The varying attitude of several civilized governments towards the institution of insurance has found significant expression in their tax laws. In Great Britain a stamp duty of 6d. was imposed in 1694 upon " every piece of vellum or otaxation parchment or sheet of paper upon which any policy insurance. of insurance should be engrossed or written," and was doubled in 1698. It was further increased (reaching 3S. rod. per policy in 1713) and varied by many subsequent acts, under some of which the percentage duty on fire insurance was also made payable by stamps upon policies. But in 1865 the stamp tax was finally reduced to the nominal sum of Id. upon each policy. A far heavier burden, however, was imposed upon insurers by the measure of Lord North in 1782, charging all fire insurances in force with an annual duty of is. 6d. for every Doc. insured. In 1815 the general rate was made 3S. per £roo, but was collected once for all upon the policy when issued; and it so remained until reductions began in 1364. The duty was wholly abolished in 186q. The revenue from this source reached its highest point in 1863, when it was £I,714,622, presumably representing insurances effected in that year to the amount of 1,143,081,333. There are no data for determining the amount of premium receipts or of losses realized on the same volume of insurance; but the tax was recognized by economists as well as by all parties to the policy contracts as an excessive burden. In many instances it more than doubled the cost of insurance. Its effect in discouraging the prudent custom of insuring against fire was very serious, and after its abolition this custom extended so rapidly that it soon became, and continues, practically universal in Great Britain. Upon the continent of Europe fire insurance is generally taxed quite heavily; most so in France, where the direct duties on the premiums, together with the registry and stamp taxes paid by the companies, have been estimated to add one-fourth, or perhaps one-third, to the cost of insurance. In the United States the companies are taxed, each by the state in which it is domiciled, upon their real estate, and often upon their capital, surplus or profits, and are required in other states to pay fees to the insurance departments, and commonly an excise of from I to 21% of their premiums. An elaborate table is prepared each year by a committee of the National Board of Fire Underwriters, showing the aggregate amount of taxes paid by the companies operating in New York in comparison with their receipts and profits. The statement received and published by the board in 'goo contained the following; For the Year For Twelve Years 1899. 1888–1899. Premiums (fire and marine). $134,450,639 $1,425,929,631 Losses paid (fire and marine) 91,031,677 856,978,494 Expenses . . . . 52,849,129 517,667,238 f ncrease of liability (un- 8,998,526 59,104,388 earned premiums, &c.) Net loss in the last year . 18,428,693 Net profit in twelve years .. 7,820,489 Amount of taxes paid 4,495,332 35,984,081 Taxes were of premiums 3.34 % 2.52 % Taxes were of premiums, less 10.35 % 6.32 % losses In qualification of this statement, it may be said that the reported expenses appear to include taxes, and that the additions charged to liability are to some extent theoretical and flexible. It also appears from the state reports that upon the entire capital and net surplus of $191,000,000 employed in the business in the United States by 316 joint-stock companies, dividends to the amount of $8,000,000, or 4.2%, were paid in 1899 to shareholders. Nevertheless it is true that competition among the companies, together with unfriendly legislation, has reduced the profit upon their aggregate capital near the vanishing point, and that the taxes, the average rate of which increased 50% within the period 1891–1899, are heavier in many states than can be justified by public policy or by the analogy of other corporate interests. The true principle, doubtless, is that while the capital employed in insurance for gain ought to contribute to the state the same share of its profits as other capital, yet the premiums, agencies, policies and entire machinery representing only losses, and providing for their distribution, should be exempted, as far as the necessities of the public treasury permit. One aspect of the taxation of fire insurance is of especial interest, namely, the very general disposition of legislatures and municipal authorities to impose upon the underwriters the cost of fire departments. The systematic prevention and extinguishment of fires are everywhere assumed to be proper work for the community at large. But the first license granted by the crown to issue in= surance policies in London in 1687 was conditioned upon regular contributions by the authorities to support the king's gunners as a fire brigade, and in the public mind the privilege of insuring the prudent has ever since been vaguely associated with the duty of guarding the property of the whole community. The voluntary support of fire patrols by the companies in London, New York and other cities has done much to promote this view; and a substantial part of the taxes paid upon fire policies in the United States is levied for the support of fire departments, the pay and pensions of firemen and similar purposes. The tendency to increase such taxes, under the pretext that the protection afforded is for the special benefit of the companies, is strong in some of the states; though it would be equally rational to compel life insurance companies to maintain general hospitals for the sick. These returns do not include mutual companies. The compilers of the Insurance Year-Book, however, obtain from the several state departments of insurance the reports of all companies made to them of the business done within each state; and from these it appears that in 1899, for example, 160 mutual companies assumed fire risks to the amount of $1,119,772,848. Many small local associations have made no returns, but their operations are too limited to materially affect the aggregate. It is note-worthy that while mutual companies transact less than 6% of the business of the whole country, yet in the state of Rhode Island, a densely peopled manufacturing community, they have more than 78%, and in Massachusetts nearly 24%; and that, while less than one-ninth of the insured property of the United States is situated in these two states, they contain nearly two-thirds of that which is insured by mutual associations. The fire insurance business of foreign companies In the United States was comparatively small until 1870. Four strong British corporations were then in the field, and their transactions amounted to less than 9 % of the entire joint-stock business. But their success attracted others in rapid succession, especially from Great Britain and from Germany, and in 1880, 19 foreign companies assumed 23.7 % of all the risks reported to the National Board ; in 1889, 23 such companies took 30.3%; and in 1899, 35 such companies took p'2%. The distribution of the business among them is not given the board tables, but can be gathered from the reports of the American branches to the insurance departments of the states, which are summarized in the Spectator Company's Year-Books. The total net payments of the British and colonial fire insurance companies in connexion with the disastrous fire in San Francisco in 1906 amountedto over ten million pounds, and the prompt settlement of all claims strengthened considerably their position in the United States. In the United Kingdom the statistics of fire insurance are less accessible and less complete, no official records being made of the local distribution of the property insured, while the published accounts of the companies are not sufficiently uniform and detailed to make a trustworthy summary of the entire business possible. Much of it is done by foreign companies, of whose British business we have no separate statement. A statement of the revenue accounts of the various British companies insuring against fire will be found in the annual Insurance Blue Book and Guide. In the Dominion of Canada the insurance companies make detailed reports to the government bureau, and the statistics of the business are full and accurate. The following table shows the aggregate business of five companies in the Dominion in 1869 and 1907 : country, and the aggregate premium receipts and payments for losses in the last year of which a report is available will be found in the annual Post Magazine Almanack. While most of the fire insurance business in the Australian colonies is in the hands of British companies, local institutions for the purpose have had a considerable development on the same general lines as in Great Britain and with similar freedom from interference by the governments. But no accounts of the receipts and losses are available, most of the companies conducting a marine or life insurance business, or both, under the same general management. Beyond the limits of the great commercial nations, no satisfactory information is accessible concerning the practice of fire insurance. Even in Spain and Portugal there is far less intelligent interest in the subject than in neighbouring countries, and the agencies of foreign companies transact much of the business in the large towns. Six Portuguese companies have maintained themselves for many years, a few of them for nearly a century, and have established agencies in the Spanish islands and in Madeira. For other nations than those mentioned, the only systematic effort to collect the facts is made by the compilers of the Year-Book, and the results are extremely meagre. The great British and German corporations . are zealous in extending their transactions to the commercial ports everywhere, and local companies are often formed in the British colonies. In addition to those in Canada and Australia some companies in South Africa have become financially important. Small native companies have been successful in establishing their credit in Japan, Brazil, the Argentine Republic, Chile and Peru. A consider-able business is done in insuring the property of foreign residents in the Levant, on the coasts of Asia, in South Africa and the Pacific Islands, but mostly by European companies, and as an incident to the more general practice of marine insurance. There are several successful fire companies among the Dutch in Java. The small business in Mexico appears to be wholly in the hands of foreign companies. The most complete statistics of the fire insurance business collected in any country are those Upon the continent of Europe the fire insurance business is statistics. presented in the United States to the National Board conducted partly by local companies in each country and partly of Fire Underwriters at each annual meeting. The by the great international offices of Great Britain and Germany. following summary of part of the information submitted The local associations in Austria, Germany and Switzerland by the committee on statistics, loth May 1900, giving the are of three classes—public assurance organizations connected amount of fire risks insured in the United States, premiums received for them, and losses paid upon them, by all joint- stock fire insurance companies for the year 1899 will serve as an example: with local governments, private mutual companies and joint-stock companies. It is impossible to obtain balance-sheets of all, nor is any information available concerning the local distribution of the risks, or the whole amount of property insured. The Companies. Fire Risks Fire Fire Premiums Loss per Loss per assumed. Premiums Losses per $loo $too $100 of received. paid. of Risk. of Risk. Premiums. $ $ $ $ $ $ American . 218 12,251,299,499 93,577,169 59,119,018 .7638 •4826 .6318 Foreign . . 35 6,087,570,275 42,958,472 29,865,014 .7057 .4906 '6975 All . . 253 18,338,869,774 136,535,641 88,984,032 '7445 '4852 .6517 capital employed by stock cor-Fire Insurance in the United States. Joint-Stock Companies. -porations in this business in each Companies. Net Cash Amount of Amount at Amount at Losses Premiums Policies Risk in Risk in received, taken. 1869. 1907. paid. $ $ $ $ $ Canadian Companies. 54,849,706 5,663,696,931 59,340,916 412,019,532 36,073,543 British Companies . 159,372,986 14,745,342,255 115,222,003 937,240,828 105,203,259 American Companies. 32,449,482 2,801,078,045 13,796,890 265,401,198 20,129,323 All Companies . . 246,672,174 23,210,117,231 188,359,809 1,614,661,558 161,406,125 a table in calculating the values of life contingencies was also discovered by Dr Halley. He showed that where a payment is to be made at a future date, if a named person be then alive, its present value is the sum which compounded at interest during the interval will amount to that payment multiplied by the fraction representing the probability that the person will survive. These two elements, compound interest and the probability of life or death, are the foundations of the theory of life contingencies. From Halley's time the progress of the theory has been in three directions: first, in accumulating facts from which averages are deduced, and analysing the data so as to eliminate disturbing influences, that is, in constructing trustworthy tables of mortality; secondly, in extending the inferences from such tables, and multiplying their applications to needs of practical life; and thirdly, in facilitating the calculations which these applications require. But while Halley thus firmly and lastingly drew, in outline, the theory of life contingencies, the numerical results attained by him were grossly imperfect. Forced by the lack of data to assume that the population was stationary, and to rely on a rude estimate of its numbers, he well knew that his conclusions were but provisional. Yet they were far in advance of the general mind of his time. As late as 1694, and even in 1703, parliament substantially re-enacted the old law for valuing leases at seven years for each life. The meagre Breslau Table long remained the only serious attempt to utilize actual observations of mortality for scientific purposes. In 1746 A. de Parcieux (1703-1768), a mathematician of Paris, published an Essai sur les probabilites de la duree de la vie humaine, in which he presented mortality tables formed by himself, one from the records of certain Tontine associations, and five others from those of several religious orders in Paris. The Tontine experience table was a much closer approximation to the true course of mortality, as shown by later investigations, than any of its predecessors, and indeed now appears, despite the crude manner in which the materials were treated, to have been more accurate and more trustworthy than the Northampton or even the Carlisle Table of much later date. The essay of de Parcieux was an important source of information to advanced students in France and Germany, but attracted no general or popular interest, nor was it followed up by progressive researches of the same character in continental Europe, while it remained almost unnoticed in England. _ Throughout the 18th century the customary treatment of life annuities was as chaotic and fanciful as before, though some writers of eminence, most notably Dr Thomas Simpson of London (1752), treated the theory of the subject with great intelligence, and in 1753 James Dodson of London (great-grandfather of Augustus de Morgan) projected a life insurance company in which the premiums should be accommodated justly to the ages of the insured. But life insurance as a business really began with the Equitable Society of London, founded in 1762. The associates petitioned for a charter, but the law officers of the crown refused it, saying that the scheme depended for success on the truth of certain tables of life and death, " Whereby the Chance of Mortality is attempted to be reduced to a certain standard. This is a mere speculation, never tried in practice." The society was organized as a voluntary association, and began business in 1765. Its premiums were computed from the Breslau Table, with some corrections from the London Bills of Mortality, and were far higher than any now in use. But the managers, in face of actual business, needed more light. Dt Richard Price, a student of the new science of life contingencies, was consulted, and soon devised tests of the society's experience and measures of the financial results, which are in principle those still practised. He also aspired to construct a more accurate table of mortality, and discovered data in certain parish registers of Northampton which promised to represent the average of life in England. From these he formed in 1780 the Northampton Table of Mortality, and computed a new and largely ton table. reduced to. Tab:- scale of premiums for the society. The historical importance of the Northampton Table lies in the profound impression it made on the general mass of intelligent persons.
End of Article: INSURANCE
INSUBRES ("Ivoµ(3pes, "Ivvouf pot)
INTAGLIO (an Ital. word, from intagliare, to incise...

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