The Chanute times., 1900-08-31
MORE ABOUT FIRE INSURANCE.

that have failed, which have been
many.
trust I have made this clear to
"Property owner" AS to his queries
regarding valued policy and anti-com- !
pact laws / am not qualified to speak,
in fact, ] would like to be enlightened
myself.
BUSINESS MAN.
The following letter gives another
mans views
Dear Sir-Noting articles in recent
issues OF your paper relative TO hre
insurance leads me answer In part at
least Property Owner" who inquiries
why capital continues in fire insurance
il the business is Improbable.
The bulk of the worlds commerce Is
conducted on credit, necessitating hre
insurance. The wholesale merchant
and manufacturer can and DO trust
to the honesty OF their customers, put
they cannot risk the loss of property by
the elements. Therefore, insurance Is
not a matter of choice, but prerequl-
site. and what Is known as STOCK IN
surance is about the only variety that
can be used as collateral. Stock IN
surance requires capital, and business
men form companies more for the pur-
pose of protecting their commerce than
in the expectation of any direct pront
out of underwriting itself. AS an IL
lustration: 1t will take from fifty TO
sixty millions of dollars to handle TINS
years Kansas wheat crop alone. Gram
men have to borrow money for this
purpose. and the banks nave to have
insurance policies as collateral 10 pro-
tect themselves and their customers
from possible loss by fire, lightning
and tornado. The same is true OF the
retail merchant when he buys goods,
or the owner of lot or farm when ne
wants to borrow money with which to
build.
The sixty leading fire insurance COM
panies doing business in this country
for the ten years ending on the 3lst
of December. 1898, made net prohI
out of underwriting of 2.51 per cent
Since then the fire insurance losses on
this business have wiped out all TINS
profit, and much more, yet capital does
not withdraw from the business for the
simple reason that it cannot as long
as the commerce Of the country Is car
ried on on its present basis.
A stock fire insurance company has
q paid-up cash capital and surplus. On
the wisdom with which its assets are
invested depends the profit. The most
successful companies distribute but
small amount of the profits on these
investments to their stockholders, IN
stead, allowing them to accumulate as
a protection to their policy holders
and this accounts for how companies
have doubled their assets, the OBJECT
being protection for their policy hold
ers in the event of confiagration or un-
usual fire losses.
There is probably no business in
proportion to the money invested in
which there has been as much failure
as in fire insurance. Certainly none
in which there has been more. 1t is
attributable to various causes, among
others. to conflagrations and abnormal
individual fires (such as this year, ,and
especially to fire companies, unlike HE
companies. having no combined statis-
tics showing what the average loss IN
a series of years has been on any
class of property, the experience OF an
individual company being worthless,
and hence having to guess at rate,
the fierce competition in the business
rendering same as rule below the
profit line.
The best evidence that the business
of fire insurance has not been pront-
able is the fact that there is less than
one-fortieth of the American ccmpa-
nies doing business today in this coun-
try that were in existence twenty-five
years ago. The capital thus invested
was either lost in the business or plac-
ed in enterprises where it would not
be liable to be wiped out by confagra-
tions or reckless competition.
Most states have laws regulating the
manner in which insurance companies
are to invest their assets, and all states
have laws regulating how much rein
| Surance reserve edcH tOlIpuHy mas ~
maintain for the protection of it's pol
icy holders. All stock companies have
annually to furnish sworn statements
to the various insurance departments
of their financial condition, clearly and
minutely setting forth of what these
assets consist and how invested, and
which statements can be verified by
examination. There is no other busl-
ness subject to such surveillance, ne
cessitating showing clearly from what
sources it's profit or loss annually has
accrued.
Dealing in various kinds of collat-
eral especially fire insurance policies
requires my keeping posted on this
class of business, and the foregoing is
the result of my Investigations.
BANKER.
August 18th. 1900.
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