THE IDEA OF INSURANCE A MODERN ONE. THE NATURAL GROWTH OF THE SYSTEM. FIRE INSURANCE IN THE UNITED STATES. THE RISK OF FIRE INSURANCE. THE NEED OF LARGE COMPANIES. THE INCREASE OF THE BUSINESS. -THE CAPITAL INVESTED IN IT. AGENCIES. THE ABUSES OF THE BUSINESS. - SPECULATING COMPANIES. INAUGURATION OF STATE INSURANCE DEPARTMENTS. THE LOSS DOUBLED BY A COMPANY'S FAILING. THE LESSON OF THE CHICAGO FIRE. THE LOSS IT CAUSED. MR. LOWE'S SUGGESTION IN PARLIAMENT. -THE ADVANTAGES IT PROPOSES.

THE system of insurance is entirely a product of the modern spirit of society, which tends, in all our social and industrial relations, to replace the isolation of selfishness by the unity of mutual sympathy and aid, or, according to the philosophic formula, egoism by ultraism. The first application of the principle of insurance was to marine risks; and this, as is easily seen, was very natural. The risk of a ship was more unusual than that of a house; the owners of such property were fewer; and the risk of loss being so much greater, it was more natural that those interested should combine. At first the assumption of marine risks was taken by private persons, who agreed to assume the responsibility for a certain amount of loss, and signed their names, with the amount they would insure, under the list of the ship's cargo, and from this practice the name "underwriter," applied to marine insurance, came into vogue. From this arrangement the joint-stock company engaged in insurance naturally arose, and the extension of the principle soon included fire insurance.

In the United States the early attention paid by the colonists to ship-building and commerce caused the practice of underwriting for marine risks to be very soon adopted; and from this beginning attention was finally turned to fire insurance. The precise date when the first company for transacting a fire insurance business was formed does not appear, but before the revolution the business was regularly established. It was the custom in those days,

and even down to within about forty years, to place upon a house which was insured a plate bearing the name of the company which had granted the policy. In many of the villages throughout the earlier settled portions of the country, upon the old houses which yet remain, may still be seen such plates, bearing, in some instances, the date of the year when they were affixed, and some design, such as two hands clasped, or a Phoenix rising from the flames, by which the advantages of fire insurance was typified.

Fire insurance differs from life insurance in being more entirely founded upon chance. It is certain that every one of us must eventually die, but it is by no means sure that every house will burn down. From the average mortality of a sufficient number of persons, the probabilities of life insurance have been calculated with great accuracy; so that the business can be followed with a method, and a certain rule applied for the decision of any special case. With fire insurance, however, the law of probability has not yet been calculated with such accuracy, and from the very conditions of the question it is probable that it never can be. With the exercise of a proper business precaution, the operations of life insurance can be made as certain as a mathematical problem; but even the most cautious foresight and care cannot give this definite certainty to the operations of fire insurance. In consequence, therefore, there is always an element of speculation in such transactions, and for this reason the business, in the hands of small companies, can never be made secure; they have not a large enough range of good risks to cover the loss of any unfortunate one. This has been so frequently proved practically that it is beyond question.

With the great increase in the industrial activity of this country during the present century the business of fire insurance has kept pace, and the capital now invested in companies doing an exclusive business in fire insurance may be fairly estimated at between two and three hundred millions of dollars. So clearly has the truth of the principle, that large companies, doing a wide and extended business, are the safest, been seen by the public, that, throughout the most recently settled portions of the country there has been but little opportunity offered for the establishment of local companies, since they could not offer as good inducements to the public as those presented by the agents of older, richer, and better established companies. In this way the fire insurance business has become a most important interest in certain localities. This

growth of the business of fire insurance, as well as that of other kinds of insurance, brought with it at first natural abuses, such as a greater extension of the business than was safe, and also opened a field to the exploitation of speculative companies, which were not based upon sound financial principles, but hoped by success to make money for their stockholders. Should they do a large enough business, and collect sufficient premiums without meeting any losses, it was evident that the business was worth trying; but if they should be unlucky enough to meet with misfortunes, the result was only their failure, and the loss came upon the insured, since the actual capital contributed to the company was very little, only enough to pay the expenses of trying the experiment. So numerous were the instances of these insurance speculations, and so disastrous were they to the public who had been deceived by them into supposing that the security could be gained by paying for the policies they issued, that public attention was roused, and measures were proposed for legislative action, by which the governments of the states in which insurance agencies were established should have some control over them, and, in the interest of the public, prevent such companies as were unworthy of confidence from seeking to gain it.

From this arose the establishment of insurance departments in some of the states, Massachusetts having inaugurated this movement, and New York having perfected it. The experience which New York had acquired by a similar supervision exercised over the banks of the state made her more ready to apply the same method of control to the insurance companies, and more readily aware of its advantages. The very essence of fire insurance is security and stability. A company which fails when the crisis comes, for which it pretended to be a safeguard, is worse than no company at all, for it doubles instead of diminishing the loss by fire. The insurer, who has taken out one of its policies, finds, when his house has burned down, that the security he thought he had is worthless, and that he has thrown away the premiums he has paid.

To perform for the public the same office with regard to its insurance policies that it does with respect to its bank-notes, that is, to provide that the public shall not be liable to being cheated in them, is one of the legitimate functions of the government, and is especially so in a republican government, which should be in fact, as it is in theory, the agent of the public, delegated to perform

just such duties as these, for which individuals are necessarily incompetent.

By the working of this innovation, the danger of speculative fire insurance companies has been as nearly done away with as is possible with a system of insurance based on individual companies competing for the business. That absolute security is not gained by such a system, even with the supervision of a state department, is shown by the recent terrible catastrophe at Chicago.

From the report of the State Superintendent of the Insurance Department, made the 11th of November, 1871, and based upon statements returned from the companies in answer to a circular calling for them, it appears that twenty companies, organized under the laws of the State of New York, had ceased to do business, and gone into liquidation. The loss by this single conflagration, supposing that the entire assets of the New York companies which ceased business in consequence were absorbed to meet the loss, and adding that incurred by other companies, which still continued solvent, was in the State of New York alone $20,724,457. The aggregate loss of all the insurance companies doing business in this country, including six foreign companies, was $88,634,122, which was divided among three hundred and forty-one companies, having as their total assets $145,879,521, which shows that by this single catastrophe they lost one half their assets.

Such a crisis as this calls attention to the proposition which was made a few years ago in the British Parliament by Mr. Robert Lowe, that the government should assume the business of a general insurer for that country. At the time when this suggestion was made it excited but little attention, being passed over as either unwise or premature; but by the light of the Chicago fire, it is made plain that it requires the collective wealth of a nation to meet the strain of a catastrophe like this. Besides, too, the economy introduced into the administration of the business, if the nation's insurance were conducted by one bureau, instead of by hundreds of different companies, each with its numerous officers to support, would in fifty years-and such an occurrence would most probably not occur oftener-prove enough to make up even such a gigantic loss. At the same time also if insurance was made, in the hands of the government, universal, the rates charged would need be so much less than those now found necessary, as to itself provide sufficiently to meet such catastrophes when they occur.