The Washington herald., 1908-03-29

In the publication known as the New
Jersey Retailers Annual. which is devot-
cd TO the lumber manufacturing industry.
Justin Peters. manager of the Pennsylva-
MIA Lumbermen's Mutual Fire Insurance
Company. discusses IN en- interesting
manner the relation existing between fire
insurance and credit. While Mr.. Peters
article is addressed TO lumbermen in par
ticular. it has bearing upon every kind
Of business done in quarters where credit
is asked or extended.
After showing that his subject is Of Pc
culiar interest to lumbermen. Mr.. Peters
says:
"A close relationship exists between
fire insurance and credit. One cannot suf-
fer without affecting the other. This IS
true In a broad sense, and it is true in in
dividual cases.
If ruinous confiagrations were 20 drive
insurance capital out of the field, there
would at once be a shrinkage Of credit
and a calling in Of loans throughout the
country, as compared with which our re-
cent experience would seem trivial The
business depression would not only be
acute but what is worse. it would be
prolonged until such time as capital could
be again drawn TO this channel of invest
rnent. At first rates would be so high
that many people could not afford TO car
~ the insurance necessary TO support
their credit
Competition Decides Rates.
This would continue until a sufficient
volume OF capital. invested in the insur-
ance business. would again create compe-
tition. II is my opinion that the losses
sustained by the confisgrations at Bal
t:more and san Francisco and the conse-
quent heavy payments by insurance com
panies are more responsible for the pres
ent business conditions than any or ali OF
the many other reasons that have thus
far been given.
There are few men in the business
who are strong enough TO ignore the ef-
feet which fire insurance has upon credit
For the average man engaged in business
fTe insurance is essential TO his credit
and will continue 10 be so long as goods
are sold on time and man borrows money
''Ninety-seven per cent of the worlds
business is conducted on credit and only
per cent on a cash basis 1t is there
fore only natural that creditors should
see TO il that protection is extended 10
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destructive forces of nature and most
frequent causes Of loss
IF it were not for fire insurance. the
merchant would not be justified in selling
goods 10 a customer in excess Of the lat
ter's actual capital as the goods might be
destroyed by fire, the cause of which
would be entirely beyond the customers
control. II fire insurance is carried. how
ever, the merchant may extend credit
nsA in excess OF the customers capi-
~ Why? Because II he knows the man
~be honest. Industrious, careful, and
pable. with the removal of the possi-
ility Of loss through fire. he feels that he
Is reasonably certain Of being paid the
money due him.
Men Rated by Insurance.
The mercantile agencies inquire as to
the amount and character of fire insur-
ance carried and rate a firm accordingly.
In 90 per cent of the cases where mer-
chants suffer fire losses without insurance.
the creditors fail to collect the money
due them. Not only do they lose money
on the goods which they have sold on
credit. but they find that. although not in
the insurance business, they have actually
been carrying the bankrupt's insurance
without the premium charge which a fire
insurance company would require for sim
liar work. Profit by this fact, and when
you ask customer for statement, also
require that he shall give you the amount
Of fire insurance which he carries and
the names or the companies in which he
is insured. This will help you 10 pass
UPON the quality OF the indemnity
Remember that many men have failed
after fires because they could not collect
their insurance promptly, as we'll as for
the lack OF it,
The man who can't get insurance has
no credit One recommendation for credit
is 10 have a line Of reputable insurance
companies on a risk This is not an un-
erring proof that the moral risk and busi-
ness methods Of a firm are all right but
Il IS presumptive evidence Of that fact.
The lumber insuring companies do not
want 10 sell insurance TO a lumberman
TO whom their officers would not sell lum-
Der. We watch a mans credit and the
credit man watches us. II is no unusual
thing for US 10 have a representative of
a mercantile agency call TO inquire about
mans insurance ana our opinion OF him.
Lack of Insurance Reflects on Firm.
1T is a reflection on business Judgment
and thereby on a firms credit not to be
properly protected by fire insurance A
certain well-known lumberman who lost
heavily in fire some years ago and who
did not carry enough insurance. said to
me that. while he had suffered a heavy
loss which he could i'll afford TO do at
his advanced age, the point that troubled
him most was, that his business asso-
ciates Of lifetime would say that he had
shown poor business judgment
The lack of fire insurance in most
cases Is also an indication that a man
has not formed the habit OF guarding
against disaster. This is a vital defect
in character that will manifest itself in
other ways thar by ignoring the advan-
tages Of fire insurance.
The question may very properly be
asked If 1t is ever possible for man not
20 carry insurance without thereby af-
fecting his credit. To this question 1
answer Yes" Where a man has a sub
stantial surplus OF available capital out
side Of HIS business. so that the heaviest
fire loss that he can possibly sustain will
not cripple him, such a PERSONS credit
would not suffer 10 any appreciable ex-
tent. Few Of us, however are so stu
ated. Whether such a case as that above
cited would affect ones credit or not. IL
is fact that it is a poor business propo-
sitioD for person TO engage in the in
surance business in this way
What Is Essential in the Company.
You have seen from what has preceded
that fire insurance is essential to the
commercial standing OF most men This
being true. the next point is, What is es-
sential 10 the credit OF fire insurance
company? The answer is:
l. The character of the men who are
at the head of the institution as well as
the character of its employees. While