Worcester daily spy. [volume] (Worcester [Mass.]) 1850-1888, 1872-12-06
s,.,e ar uun;cinaI Insurance.

company's insuring up to the amount OF their
capital in one ward.
State or Municipal Insurance.
Mr. Editor: Among the various schemes
which the insurance frenzy, brought on by the
Boston fire, is busying itself about, | notice
particularly those of state and municipal insur-
ance The argument in favor of them is that
insurance companies in great fires-like banks
in times of panic-fai TO meet their obligations,
and that something more reliable is necessary.
Without stopping to prove the analogy between
banks and insurance companies, and attempting
10 show by parallel arguments that the banking
business of the commonwealth should be done
by the state or municipalities, permit me to offer
a few suggestions as to the practical working Of
state or municipal insurance.
1t obviously must be effected in one of two
ways Either the state or each municipality
must levy a general tax upon all property to
raise a fund wherewith to pay all losses in its
territory, or it must charge premium adequate
to the particular risk.
If the former course is pursued, inasmuch as
all property Immediately becomes insured, there
will be no need of home or foreign insurance
companies Whether this would be a practical
avoidance of all existing charters, will not stop
TO discuss. That such system would be not
only exceedingly unjust to the public, but pro-
motive of yillainy, needs no great knowledge Of
the business to discern.
Unjust, because persons whose risks are not
worth more than 4-1O of per cent year would
bava To contribute bo CANA pprSppa uhn
risks are worth 10 or IS per cent year. The
poor widow living in her humble cottage would
be oyertaXcd to make up the deficiency III the
tax of the rich shoddy manufacturer.
Promotive of yillainy, because there being no
policies issued and hence no limit to the amount
Of insurance nor specific application of the same,
and no previous inspection of the premises by
any one interested, in a large proportion Of the
cases of loss, much larger sum would be
claimed than was actually lost; and if these
claims could be prosecuted at law, unless great
reform takes place in juries, they would be sus-
tanned. In case of state insurance, some
change in the constitution would be nee
essary to enable an individual TO sue
the state. Every practical insurance man
can eXpatiate at great length on the difficulty of
shutting out fraudulent claims under even
the most carefully worded and stringenty
guarded policy. Ii companies had been COM
PEELED to pay only honest losses the past ten
years, rates would have been lower, and the
Boston lire would not have ruined so many of
them.
If the other course is to be pursued-that Of
charging premium adequate to the rate in
sured-then the state or municipality becomes
regular insurance company. Either all foreign
and home companies must be driven from the
field, or the state or municipality becomes Il
competitor with them. If the latter, the only
advantage they will have is their more extensive
capital. To obtain business they have got to
do it as cheaply and expend as much money to
get it as other companies do, probably more. 1t
is notorious that public work costs more than
private. No city or town does the same work
as cheaply as private enterprise would. What
then is gained in any event but ampler security !?
But is even that gained? The village of Aver
nearly burnt up last spring, and although no
companies were failed by it and all the insur-
ance was paid, it was left poor. Suppose it had
insured ITSELF what tax would have been
necessary to lay in order to meet the losSesl So
each loss claimant would have got his money
minus the toT he had TO pay. 1t would have
been taking money out of one pocket to put III
another. think it extremely doubtful whether
the citizens of that town, after their experience
with fire, would be willing to undertake self
insurance.
If it is argued that premiums can be laid up
through a course of successful years to meet
such calamities, without resortng to taxation,
| answer that it cannot be done unless present
village rates are raised. There are comparative
ly few villages in Massachusetts, whose yearly
premiums are largely in excess of their current
fires
But even if it could be done, there is no GER
tanty in any individual case that it can be. If
a sweeping fire occurs wi thin year or two of
the organization Of municipal insurance com
pany, the municipality is ruined. Who wants
to take such chances?
If a sufficient number of towns combine, or
the state takes the matter in hand, so that no
large local fire shall bring local destitution with
it, then a certain amount of machinery
and of officials is necessary 10 carry on the
business. And what guarantee has the com.
munity that such officials will not be mere
party politicians, incompetent and dishonest?
If under such management they should com
pete with companies run by private enterprise,
they would be likely to lose money. If all
other companies should be driven from the
field, and whether existing charters can be abro-
gated, will not discuss-mark what an oppor-
tunity for fraud is opened.
Suppose the state is the insurer, with no COM
petition. Every localiy-its boundaries may be
town Or country lines-must have one or more
officials whose duty it is to fix rates and collect
thepremums. What an opportunity for him to
revenge himself on fellow citizen by fixing an
exorbitant rate on his risk. What an opportun.
ity for bribery in fixing rates less than they
should be! What enormous chances of injustice,
unless this official is person thoroughly trained
in the business How influential politicians might
use him for their own purpose by threatening
his removal
The real fact is that in any country where
merely political appointments are made, insur-
ance business, like any other business, can be
done better and cheaper by private enterprise,
than in any other way. That insurance compa.
mics are sometimes mismanaged, and sometimes
failed by extraordinary calamities, is true. But
such calamity as the Boston fire was no more
to be expected than an earthquake that would
have done Just as much damage. If legislation
is to be based on the recurrence of such an
event, let II also provide for tornadoes and earth.
quakes.
Legislation tending to hamper private capital
in insurance business cannot fail to either raise
the rates Of insurance or drive away companies
from the field The insurance companies of
Massachusetts have brought some millions of
dollars yearly into the state; that as much or
more has been taken out by out Of the state
companies is doubtless true, But unless they
are to be excluded from this state, is il adyisa-