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insured and to decide whether it would be to their interest or otherwise to have a fire on their premises. For although no one is supposed to make a profit out of a fire yet unsaleable stock is sometimes conveniently got rid of by this means.

Although attention is paid to the "moral hazard," as it is called, by fire insurance managers, yet the size of their business and the number of people whom they indemnify prevents them from paying to it the same attention which the marine underwriter gives to this class of hazard. A marine underwriter knows by repute practically all the shipowners and merchants with whom he does business and he very frequently puts an owner on his black list and refuses to do any more of his insurances. This course is not necessarily taken on account of fraud but because in the opinion of the underwriter the owner does not exercise sufficient care in the navigation of his vessels. Lack of care probably causes many more losses to fire insurance companies than actual fraud, and yet it is in practice hardly possible to differentiate completely between the careful and careless trader and the careful trader has to pay towards the fires of the careless ones.

It is hardly possible to take into account all the factors which make up a fire hazard, more especially the personal factors, but it must be admitted that so far as they have gone the fire offices do try to distinguish between degrees of hazard in the same trade, principally by increased rates or penalties on constructions, substances or processes which in their view increase

the danger of fire. Thus, a tariff lays down a normal rate of premium for a trade if carried on under the most favourable conditions and then piles up additional premiums for all those conditions which increase the risk. While the increase of risk is thus penalised, encouragement is given by reduction of premium for the use of appliances, such as sprinklers, which assist to put fires out. In this way the insurance companies not only make a long step towards an equitable distribution of losses, but also powerfully help to prevent fires by making insurance cheaper for those who construct their buildings and carry on their works according to the most approved methods. By means of this system of penalties on dangerous construction or methods the rates of premmium in a trade may vary enormously. In one tariff I had before me the other day the normal premium was 3s. 6d. and the maximum was about 40s. per cent., showing how great was the inducement for traders to diminish the risk of fire in every way possible. As individual warehouses or factories and their contents are sometimes insured for as much as £100,000 the additional charge for faulty appliances may run into more than £1000 per annum. Of course a power such as the tariff companies possess of enforcing high rating must be used with the greatest caution and discretion and anything like panic rates are most strongly to be deprecated. There have in the past been instances in which attempts were made to recoup heavy losses by rates which were higher than risks really demanded and

the result was the formation of mutual associations and non-tariff companies whose competition speedily led to a more equitable state of things. At present there would seem to be little real cause for general complaint. I have more than once of late had occasion to look into complaints which were conveyed to me and I have always found not only that the insurance companies were ready to give every reasonable assistance towards an investigation but were also able to justify fully the course which circumstances compelled them to take. In fact there are two striking pieces of existing evidence which show that the rates charged are on the whole no more than are required to distribute losses over the public. One is the moderate profits earned by the tariff companies. The smallness of this profit will be clear if we take the figures of all the principal British fire offices for a series of years :

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The net profit of £10,670,000 earned in the ten years works out as 6.5 per cent. of the premiums. Of this sum 4 per cent. was applied towards strengthening

the reserves and increasing the security of the public, and only 2.5 per cent. of the premiums was allocated towards the payment of shareholders' dividends. About three-fourths of the sums paid by fire insurance companies in dividends comes from the interest on their invested capital and reserves and one-fourth from their trading profits.

The trading of the last five years, 1898-1902, has been still less profitable than the figures given above, and there would have been little or no margin of net profit over the period available for dividends but for the favourable results of 1902.

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This profit of £4,905,000 represents 4.8 per cent. of the premiums. The good year 1902 was utilised to strengthen the reserves of the companies which had been drawn upon in the bad years 1899 and 1901.

The other piece of evidence is the notable failure of non-tariff companies to cut rates and live. The thing has been tried over and over again and failure has so constantly followed that the chances are much

against any new non-tariff company being able to transact business profitably. I hope there will always be non-tariff companies as I believe all competition to be wholesome and a monopoly to be as demoralising in insurance as in other businesses, but at present the amount of business done by them is infinitesimal, less than 1 per cent. of the whole fire insurance transactions of British companies.


But although we may fairly admit that taken as a whole the joint-stock fire insurance companies distribute losses over the community with the minimum of profit to themselves, there is still ample room for greater differentiation among individual members of the public. Take the simplest objects of insurance, namely, private dwelling-houses of brick or stone, with tile or slate roofs. The minimum premium is 18. 6d. per cent. per annum. Private houses are accepted freely at this rate and unless the circumstances are quite exceptional no higher rate is charged. Yet the risks in the case even of private dwelling-houses vary enormously. Consider a house in a good residential quarter of a large city with a fire brigade within a few hundred yards; consider the same house in a country town or village with little or no means of extinction; take again the same house in a shop quarter or in a quarter where there are factories or warehouses not far distant. The same house would, under these different conditions,

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