Section Ccxxxvii (_d_).

REQUISITES OF A GOOD SYSTEM OF FIRE INSURANCE.

Among the chief requisites of a good fire insurance system are the following:

A. The adoption in insuring of measures for the prevention of criminal abuse on the part of the insured. No one should be benefited by the burning of his insured goods.[237d-1] Hence, the rates of insurance should be rigidly fixed according to the real value in exchange.[237d-2] In the case of houses, the value of the incombustible elements of value should be deducted; also the value of the ground and the value it possesses from being advantageously situated, etc. The simultaneous insurance of the same object in several companies without proper notice being given should be unconditionally prohibited.[237d-3] The control of all this may be greatly facilitated by requiring foreign insurance companies to obtain a special permit to carry on their business in the country, and to allow them to effect insurance only through responsible home agents.[237d-4] Most insurance companies exclude from insurance personal property which may be easily secreted, such, for instance, as jewels, cash money, valuable documents, etc.

B. There should be a just proportion between the insurance premium and the risk. This depends not only on the style of building of the houses themselves and of those in the neighborhood,[237d-5] on the situation, the too great intricacy (Complicirung) of which extends the ravages of fire, as its too great isolation makes assistance difficult;[237d-6] but also on the nature of the business carried on in them,[237d-7] and on the condition of the local development of fire police. Highly cultured places, especially large cities, are really much less exposed to damage from fire. To not take this into account would be not only to compulsorily dole out charity to the poorer classes of the people, and to the less cultivated portions of the country,[237d-8] but it would indirectly put an obstacle in the way of a transition to the massive construction of houses, and of good, that is, as a rule, of costly fire-extinguishing institutions.[237d-9] On the other hand, administration must be rendered much more difficult by the taking of risks of many degrees of danger, especially as it is scarcely possible, for a long time, to even hope for a statistically unassailable basis of a tariff graded in exact accordance with the risk.[237d-10] If those objects especially exposed to danger should be excluded altogether, the common utility of the institution would be largely diminished; and the insured least exposed to danger would nevertheless have to complain of a relatively too high contribution.[237d-11] If every peculiar class of risks were to be treated as one whole, the insuring principle itself would suffer.[237d-12] Where the nation or municipality engages in the business of compulsory insurance, its too rigid system of rate-fixing has something inequitable in it, inasmuch as it makes the most provident housekeeper suffer from the danger from fire of his neighbor's establishment, a gas factory, for instance.

C. The certainty of compensation for damage suffered. The government should see to it that the institution does not promise more than it can perform with its joint-stock capital and by means of its premiums.[237d-13] The good will of foreign institutions to keep their promises to the letter is best assured by requiring them as a condition precedent of carrying on their business in a country, to bind themselves to litigate only in the home courts. They protect themselves against the risk of very large insurances by the system of re-insurance, by transferring a portion of the premium as well as of the risk to one or more other insurance companies.[237d-14]

D. In all highly cultured quarters, the almost entirely voluntary fire-extinguishing system, in which the people turned out in a body to battle with the flames, made way for the fire-militia system; and if the latter should make place for what we may designate as a standing fire-army which is most easily attained in connection with the fire-insurance system, we should reach the ideal of such a system, especially if the business of insurance was in the hands of the state or of the municipality. Such a system would be in accordance with the principle of the division of labor, and, also, with the fact that usually the most vital interest is the greatest spur to action.[237d-15]

Of the whole number. Match factories, 30.00 Lodging houses, 16.5 Hat makers, 7.7 Cloth makers, 2.6 Candle makers, 3.8 Smiths, 2.4 Carpenters, 2.2 Oil and color dealers, 1.5 Book dealers, 1.1 Coffee houses, 1.2 Beer houses, 1.3 Bakeries, 0.75 Wine dealers, 0.61 Small dealers in spices, 0.34 Eating houses, 0.86

(Quart. Rev., 1854, 23.) There is indeed a difference in the intensity of these fires. For instance, in inns, there have been a great many; but the damage has been for the most part insignificant.]

In the Leipzig Fire Insurance Company, as 100:1.87 In the Trieste Fire Insurance Company, as 100:1.80 In the Elberfeld Fire Insurance Company, as 100:1.19 In the Aix-Munich Fire Insurance Company, as 100:1.15 In the Cologne Colonia Fire Insurance Company, as 100:2.44 In the Karlsruhe Phoenix Fire Insurance Company, as 100:3.7 In the Berlin Fire insurance Company, as 100:6.3 In the Gotha, about as 100:2.6 (including the four fold after payment note)

In the same companies the amount of damage and of expense for the last preceding year were, on every 100 thalers, of insurance, 46 pfennigs (1/300 thalers), 44, 29, 48, 67, 55, 35, 42; an average of 45, that is 1-1/2 per 1,000. Besides, much depends on the degree to which the joint-stock capital can be applied. Thus, for instance, in Berlin, on every 1,000 thalers 200 are paid in cash, and a note (Solawechsel) given for the rest, payable in two months after notice. Where the unpaid remaining stock is but a mere book-debt, and may even be evaded by disclaiming the stock itself, it of course affords very little security.]