Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1880-01-22
INSURANCE LEGISLATION.

sembly imposing stamp-tax upon foreign
insurance companies doing business in this
State. The principle OF this bill is bad,
and it is against public policy. All at
tempts to discriminate against foreign in
surance companies are hostile to the in
terests of the people. They involve in
creased cost in insurance, and diminished
security. The effect of this bill would be
to raise the rate of insurance, and though
the tax would be only upon foreign cor
porations, the local companies would in
evitably take advantage of the rise forced
upon their rivals, to put up their own
rates. If this did not happen, the tend
ency would be for the foreign companies to
withdraw their agencies, and then the
people Of California would be left vir-
tually without security against the
risks which insurance companies deal
with. The principle of safe insurance
is distribution of risks. Without such dis
tribution there never can be any real safety
for insurers. When an extensive fire ike
those OF Chicago or Boston occurs, the
local insurance companies are almost in
variably ruined, because the securities
upon which they rely to make good their
losses are at such periods destroyed with
the insured property. No insurance COM
,,,,,, c,r Ia eou,J ,,,b;oI, o,rr;oe oil ;te
eggs in one basket. No community can be
safe which trusts entirely to local insur-
ance companies. The public interest re-
quires that risks should be divided as much
as possible, and to this end it is necessary
that there should be in every large city
a fair proportion of companies whose
securities are situated at a dis
lance, and which cannot, therefore,
be bankrupted by local disasters. This
being the case, it is evident that no impede
ments should be placed in the way of for
eign companies, but that on the contrary
they should be encouraged to establish
their agencies, and should be accorded the
same rights and privileges that are given
local corporations. There is no question
here of assisting "home industry" for
home industry in the form of insurance
companies is what no sane community can
desire to build up beyond what open COM
petition will do for it. If San Francisco
and Sacramento depended entirely upon
California insurance companies, they would
be very little better OFF than if they had
no insurance at all, yet that is apparently
what this irrational bill aims at.
Repeated attempts have been made to
obtain some such discriminating and pro-
scriptive legislation as this, but thus far
they have been defeated by popular CON-
mon sense, and the same course will, we
hope, be taken with the bill we have re-
ferred to. The foreign companies doing
business in this State land under that des-
ignation are included all Eastern as well
as all European companies) represent prob
ably three-fourths of all the capital en-
barked in the insurance business on this
coast. Their withdrawal would be a
calamity, and one which in the nature of
the case could not be counterbalanced by
any fresh investments of local capital in
the business, because, as already pointed
out, there can be no real security where
the assets of the company are exposed to the
same dangers that menace their risks. For
the protection OF property it is indispensa-
BILE that the heaviest RISKS should be borne
by foreign companies. This is of the
very essence of insurance, and any legisla-
ton which hampers with it interferes with
the public safety in the most unwarrant-
able manner. No local corporation can be
justified in seeking the passage of law
hostile to these foreign competitors, and if
any of them do demand such law they
ought to be peremptorily refused. A re.
quest of that nature would be tantamount
to proposition that the safety of all prop
erty should be endangered in order
that few persons might be en-
abled to do a larger business. Whether
such law is constitutional is
indeed question requiring serious consid-
Grafton, but beyond dispute it is against
public policy, and direct menace to prop
erty. The Legislature should bearin mind
the absolute necessity for distributing risks
as widely as possible, and that one fact
will demonstrate the necessity, as matter
of business prudence, of throwing open the
doors to the broadcast and fFeest COMPETE
ton in regard to insurance. Safety lies in
the multitude of underwriters, and with
out that factor every man who took out a
policy would be living in Fools Paradise.