The herald., 1898-10-27
SIMPLE ANALYSIS OF THE BUSI-
NESS OF INSURANCE.
RIGHTS OF STOCKHOLDERS
Weekly Real Estate Notes-Among
the Architects-The Progress Of
Building-Incorporations
OFFICE OF THE HERALD,
Los Angeles, October 26, 1893


The New York Insurance journal pub
fishes the address of President Seward of the
Fidelity and Casualty company at the re-
cent insurance commissioners meeting. Mr.
Stewards remarks upon the abstract propo.
stion of insurance as business are worth
quoting. He said:
Insurance is generally thought to be n
mysterious kind of business in which many
things deleterious to the public are prac-
ticed AS consequence the states have
legislated about it and about insurance COM
panies, and have provided expensive bureaus
to enforce their legislation. Those of us
who follow insurance know that it is a very
simple business, and are apt to believe that
the proper concern of the state in our work
is equally simple. Such, at least, are my own
views, and desire to give in this paper rea-
sons for the faith which is in me.
Insurance, as carried on in this country
is not public function. 1t may be made so
of course, by any state which chooses to set
up in the business As conducted by the
companies it is branch of private enter
prise, pure and simple. The stockholders
provide the requisite capital and business
plant. There is no partnership with the
state, and no pecuniary responsibility rests
upon the state; nevertheless the state inter-
feres with insurance enterprises in extreme
ways.
Let it be admitted that there is call for
q certain care on the part of the state. If
man engages in trade he both buys and sells
goods. The insurance man does neither
lie sells promises to indemnify against loss.
He gets but little for each contract, but his
promises may average large and be numer-
Gus. The man who trades in goods may fail
II he does loss will fall upon few individu
ais. When an insurance company fails the
area of suffering is likely to be wide. And
there is little further difference between in.
surance and other lines of business. Peo-
pie who buy merchandise can examine it
and know what they are getting. Those
who sell it can give credit or not as. they
please. If they do give credit, they can
test the solvency of the proposed buyers.
But the man who buys insurance parts with
his money and is seldom able to estimate
accurately the present condition of the COM
pany, much less its prospects of permanent
solvency.
What the individual cannot do for himself
the state ought to do. 1t should report upon
the financial condition of companies and
should know that their methods conform
to sound rules. The state has no further
duty, and whenever it goes further it is in
terfering without need and vexatiously in
the private affairs of the people.
A right manager will welcome all inquiries
by the state directed to questions of the
solvency of his company, because he recog-
nizes the right of the state to make them
and because it is good thing for his COM
pany to receive certificate of soundness
1t is good also to be rid of the competition
OF unsound and irresponsible competitors
as a result of the care of the state.
The states, unfortunately, do not confine
their legislation and scrutiny to questions
of solvency, with incidental inquiries as to
methods. They endeavor to do many other
things In doing so they load the companies
with expenses and restrict their operations.
1t is the interest of the public that sound
companies should be multiplied. The states
have legisated much in ways which inter-
fere with the formation of companies and
which burden unduly the companies which
struggle into existence.