Free press. [volume] (Hays, Kan.) 1888-1908, 1900-07-28
BUSINESS MEMS IDEA9EFIRE INSURANCE

they 1OSI Ia per cent In 4SSS, c46y
lost Is 7-10th per cent
Nearly $1oo, 900 600 OF cash assets
have been year by year kept as a guar
anty by the companies for the protec-
ton OF their policy holders It might
be largely swept away by conhagra-
ton The risk has been great, and get
taking every hazard into eonsidera-
ton, the average earnings from under
writing Of American companies on
their assets at risk have been less
than 35k per cent Banks during the
same period have earned s per cent
1t viii be seen. therefore, that the
fire insurance companies have been
earning but small profit for the risk
assumed in the investment That the
risk is great is shown by the fact that
during the last quarter of q century
over 100 American fire insurance
companies have failed or retired, and
out Of the survivors, only 80 organ
lied during the same period are still in
business.
Recognizing, then. that the COM
panies have not been bleeding the pub
lie, policy holders who have been OBJ
anti-compact laws, valued policy laws
and all legislation of such a nature, in
variably cause higher rates because OF
the additional hazard, loss and expense
to companies which has to be collected
from the public.
Statistics show that from 1893 rates
in the United States steadily declined,
while in the anti-compact law states,
they continued TO increase, and not
until 1897 did they reach q lower per-
centage than in 1893. The average rate
from 1893 to 1898 was Sill per 500
in the United States, eleven cents lower
than in 1893. In states having an an
ti-compact law the average rate during
the same period was s1.27. or one cent
lower than in 1893.
Laws prohibiting companies to as
sociate together to maintain fair rates
have utterly failed to reduce them
After such laws are enacted, no com
pany with business principles viii
write policies at ruinous rates. The
old rates, therefore, prevail. II com
panies were allowed to associate to-
gether and compare their experiences
that rates could be decreased. They
cannot reduce them because they are
forbidden by law to act in concert.
Valued policy laws which require
companies to pay the face of the policy
in case of a total loss, whether the
property burned is worth that amount
or not. have increased the amount Of
fire waste and caused higher rates, be
cause the greater loss requires just
that much more fire insurance tax.
When a fire company issues a policy
Of $4,000, for example. it does not
agree to pay that amount in case of a
loss, but it does give the policy holder
the privilege of protection up to that
amount. If no has that much value
and it is destroyed, he is entitled to,
that amount of insurance.
To compel companies, therefore. TO
pay the face of a policy, regardless OF
the value Of the property destroyed, is
an incentive to crime. When a man
through Misrepresentation secures $10,-
| 900 insurance on So 900 worth of goods,
the valued policy law compels the COM
panies to pay, not the value Of the
property destroyed, but the amount
named in their policies as the limit of
| their liability.
The only persons who can possibly
! be benefited by such laws are those
who carry insurance beyond the value
of their property. Rates have to be
| increased where valued policy laws
prevail to cover increased fire waste.
in fact, it may be stated as an axiom.
that any law that increases the expense
| of fire insurance, or tends to increase
the fire waste of this country, causes a
corresponding increase in the cost of
fire indemnity, which must be paid by
| people who need it.
When you can drop nickel into a
phonagraph talk must be cheap in
deed.