The New York herald. [volume] (New York, N.Y.) 1920-1924, 1921-07-20
GIVING A THOUGHT
We
fire INSURANCE
CONFEDERATION Lessons - Pre-
MUM Rate on the Down
Grade Cost Not Increased
During War Period Service
Back of Ind emnity.
tFirst of Series Of Eight Sketches.
The Second wan Appear IN "The
Herald" IN the Near Fptnro.l

futures of the great stock fire insur-
ance companies constantly ask that
question OF themselves as they keep in
their minds fairly exact figures show
ing the amount of liability which
would result from an uncomfortable
fire.
New York has more fireproof build
5ngs than any other city in the world.
To US they mean fire barriers dividing
the city-much as do fireproof division
walls in some manufacturing plant.
The ordinary blaze is smothered before
it has chance to assume alarming
proportions, and yet conflagration so
great as to startle the world is always
a possibility. am not an alarmist
and therefore wish to emphasize the
fact that there would have to be most
remarkable conspiracy of untoward
fate and circumstance, before such dis
aster could sweep New York. But
well, that's our biggest problem, just
the same, in New York as well as in
every other city in the country.
1t has been my privilege to observe
fire underwriting from the reconstruc-
tion days that followed the Civil War
TO the present when we are reacting
from a world struggle that was for the
protection of our very existence. II
has been pride and satisfaction to
me to know ylat alone Of all the great
modern business agencies, fire insu--
ance companies 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,
a temporary surcharge was made, but
that increase Of cost was only 10 per
cent, and it remained in force only
few months. Ours il 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 300 per cent. Perhaps your
own rate did not change, but it is still
true that the average cost was lowered
That too, in the face OF a demand un-
precedented in the history of the bust
ness due largely to the enormous in
crease in values. Fire insurance at
least was one business where demand
did not make for extortion or over
charge when the pressure was on.
The fire that gave birth to fire insur-
ance as business occurred in London
1866. This was bit before my time,
but have observed at close range the
results from the Chicago Fire OF 1871,
followed by the Boston conflagration
of 1872 Disastrous as they were to
the companies OF that day, the economic
effect was small compared with the
destruction in three days time OF
$3.50, 100000 OF property in San Fran
cisco in 1906.
Do you recall what happened in 1907
the year after the San Francisco fire?
Was there not panic that tested us
all? Such an enormous shifting OF
values could not be made without n
severe reaction and the economists told
us that the prime factor was the sudden
withdrawal Of over $500, 100000 from
investment by the stock fire insurance
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
TO cash in on their prime securities
Further, they had to call into Their
business about s90,000,000 of new
money as a result OF that one con
flagration. Despite all this the fatal
ties among companies occasioned by
that catastrophe were negligible COM
pared with those following the earlier
Chicago and Boston conflagrations
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 conflagrations mentioned
are only three OF score or more during
my lifetime, each OF which has taught
its lesson. Their combined effect has
been TO lower tho average cost OF fire
insurance to you! Sounds like an alb
surd statement, doesn't IL? And yet
literally, il is true. Conflagration.
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
cleanlin~s and careful management
the inducement being to give you
heavy credits in your premium rate
when you follow our counsels. Today
no srchitec. OF any great structure
would drear, ~ beginning his plans
without consulting the men behind
tho whole rating system OF fire insur.
ance-.tha engineers who specialize fol
us on how TO prevent and extinguish
fire and how to build TO resist fire.
All this il back of the modern science
OF rating IN fire insurance whereby the
insured practically fixes his own
premium at, and in which his state
sectional and city conditions have an
hnportant bearing. Ratemaking Ia she
manufacturing end Of the business OF
stock fire underwriting.
JOHN 3. MORTON