New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1921-07-17
GIVING A THOUGHT
TO
FIRE INSURANCE
Conflagration Lessons-Pre-
MUM Rate on the Down
Grade Not Increased
During War Period-Service
Back of Indemnity
tFirst OF Series Of Eight Sketches. The
Second VIA Appear in The Tribune
ia the Near Futurel

Mammalian or brooklyn in the New
York City of to-day?
Those who are responsible for the
futures of the great stock fire insur-
ance companies constantly ask that
question of themselves as they keep in
heir minds fairly exact figures show
ing the amount of liability which
would result from an uncomfortable
ERE.
New York has more freproof build
ings than any other city in the world.
To us they mean fire barriers dividing
the city--much as do freproof division
walls in some manufacturing plant.
The ordinary blaze is smothered before
it has chance to assume alarming
proportions, and yet a conhagration so
great as to startle the world is ALWAYS
possibility. I am not an alarm
list and therefore wish to emphasize
the fact that there would have to be
most remarkable conspiracy of IN
toward fate and circumstance, before
such disaster could sweep New York.
But-well, that's our biggest problem,
just the same, in New York as we'll as
in every other city in the country.
1t has been my privilege to observe
FIRE underwriting from the reconstruc-
ton days that followed the Civil War
10 the present when we are reacting
from world struggle that was for the
protection or our very existence. 1t has
been a pride and satisfaction to me
to know that alone of all the great mod
ern business agencies, fire insurance
comp anies have not increased the cost
of their services to the public in this
period of high prices. When the war
was on and we were all readjusting
ourselves to the higher costs of living,
temporary surchargc was made, but
that increase of cost was only 10 per
cent, and it remained in force only a
few months. Ours is not business of
immediate results and we take our risk
today, but our profit, if any, may only
be determined in the distant future.
The average cost of fire insurance,
however, is not only lower now than it
was before the Great War, but it kept
on going down during the war when
everything else went up from so per
cent to 800 per cent. Perhaps your
own rate did not change, but it is still
true that the average cost was low
cred. That, too, in the face of a de-
mand unprecedented in the history of
the business, due largely to the enor-
nous increase in values. Fire insur-
ance at least was one business where
demand did not make for extortion or
oyercharge when the pressure was on.
The FIRE that gave birth to fire insur-
ance as business occurred in London
in 1866. This was a bit before my
time, but [ have observed at close
range the results from the Chicago Fire
in 1871, followed by the Boston con-
hagration of 1872. Disastrous as they
were to the companies of that day,
the economic effect was small COM
pared with the destruction in three
days time of $3s0,Oo0,O 900 of property
in San Francisco in 1906.
Do you recall what happened in
1907-the year after the San Francisco
hre1 Was there not panic that tested
us all? Such an enormous shifting of
values could not be made without a
severe reaction, and the economists told
us that the prime factor was the sud-
den withdrawal of over $200,000,00O
from investment by the stock fire in-
surance companies to pay their losses
in San Francisco.
Maybe this is a good moment to
point out that fire insurance only in
IDENTITIES; it does not restore. That
money paid out in San Francisco came
from capital and surplus funds of stock
fire insurance companies and from the
pockets of their stockholders. To pay
their losses there the companies had
10 cash in on their prime securities.
Further, they had to call into their
business about $90,o00,000 of new
money as result of that one con-
Hagration. Despite all this the fatali-
ties among companies occasioned by
that catastrophe were negligible COM
pared with those following the earlier
Chicago and Boston conhagrations
when wildcat banks and wildcat insur-
ance companies were numerous. There
are few of that type in existence today !;
the insurance laws of all the states are
too rigid and the public supervision is
too close.
The later CONGREGATIONS mentioned
are only three of score or more dur
ing my lifetime, each of which has
taught its lesson. Their combined effect
has been to lower the average cost of
fire insurance to you! Sounds like an
absurd statement, doesn't it? And yet
literally, it is true. Conhagra atoms
have taught us to urge you to erect
better buildings and adequately to safe
guard them from fire by every ap-
proved mechanical device, and by
cleanliness and careful management
the inducement being to give you heavy
credits in your premium rate when you
follow our counsels. Today no architect
of any great structure would dream of
beginning his plans without consulting
the men behind the whole rating sys-
tern of fire insurance-the engineers
who specialize for us on how to pre-
vent and cxtinguish fire and how TO
build to resist fire.
All this is back of the modern science
of rating in fire insurance whereby
the insured practically fixes his own
premium rate and in which his state,
sectional and city conditions have an
important bearing. Ratemaking is the
end of the business of
stock fire underwriting.
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