Page:Encyclopædia Britannica, Ninth Edition, v. 13.djvu/175

FIRE.] INSURANCE 1G3 profit, or at all events of saving for themselves what would go as profits to the companies which would otherwise insure them. Sometimes this temptation seizes the inhabitants of a particular town, sometimes the persons interested in some particular trade, sometimes an ecclesiastical body. A community which has taken out of the hands of joint-stock companies the supply of its own gas or water, and finds itself as well served as before, perhaps better served and more cheaply, is apt to think that it may insure itself against fire as well. But, besides the complications in the problem which have been already alluded to, and which require technical skill and extended experience for their equitable solution, there are few bodies or communities which possess a sufficiently wide area to make insurance profitable or even safe. If there had been such a system at Boston or Chicago or St John s when these considerable cities were ravaged by fire, the effects would have been still more disastrous to them than they were. Certain classes of property again seem liable almost to epidemic fires, from causes which are often not far to seek ; and if, for example, the owners of any particular class of mills were to combine in a scheme of mutual insurance, they might find that, besides the great difficulty of agreeing on how each milj, was to be rated, or on the compensation to be awarded on the occurrence of a fire, they were exposed to exceptionally numerous claims just when their own trade was most depressed, or when their relations with their work-people already loaded them with sufficient anxiety. Schemes of so-called mutual insurance are tried from time to time, but scarcely ever without being based on a subscribed or paid- up capital (the contributors to which have to be remune rated), or without looking for outside business to give breadth and ballast to the enterprise. Accordingly the system of fire insurance which has virtually superseded all others, and has contributed most to the public benefit, is that which is conducted by joint- stock companies, offering to the insured the guarantee of their capital and other funds, and looking to make a profit by the business. It is a department of commercial activity eminently suited for joint-stock enterprise, requiring for its success, and indeed almost for its safety, that its transac tions should be various in character and spread over wide areas of space and time, and be invested with a certain amount of publicity, and enjoy that prolonged existence which attaches more to corporate than to individual effort. Fire insurance as a business consists in undertaking a certain risk more or less considerable in amount, in return for a comparatively small sum, received beforehand, called the premium. While the amount of risk undertaken is strictly limited to the sum insured, the degree of risk is an element extremely difficult to measure, and liable to much fluctuation. Whether of ten thousand houses or shops, or stores, or factories, ten will be more or less injured every year by fire or a hundred is a matter partly of experience, but partly also of conjecture and, as we say, of chance. Assuming that the proportion would always be the same under precisely the same circumstances, not perhaps every year but on an average of years, the questions remain whether the circumstances will always be the same, and whether if they be the one thousand cases on which we have made our own calculations are a sufficient basis for dealing with ten thousand cases. The slightest observation reveals an endless diversity in the risks undertaken, and, even if an absolute law could be reckoned on, the risks would require careful and accurate classification before the law could be deduced. But, in point of fact, the risks are always changing. If we take what from an insurance point of view is the simplest and safest " risk," a private dwelling house in a large town, the question suggests itself, TIow has this risk been affected by the age of the building, the character of the occupants, the introduction of gas or paraffin or lucifer matches, by the proximity of more dangerous property, and by the improvement or deteriora tion in the public supply of water and the public arrange ments for extinguishing fires 1 Infinitely greater changes take place in the degree of risk attending warehouses and manufactories, and many of these developments are of an unexpected character. The great fire in Tooley Street, London, in 1861, was aggravated by a prodigious escape of burning tallow, which literally set the Thames on fire, and long defied all efforts to extinguish it. More lately at Leith a highly inflammable spirit recently introduced into trade exhibited similar characteristics. At Newcastle a fusion of nitrates of soda or potash mixed with burning timbers caused a prodigious aggravation of a fire ; and at Glasgow and elsewhere the fine flour dust of a corn mill, when mixed with a certain quantity of atmospheric air, was unexpectedly found to be as explosive as gunpowder. But the speculative hazard of fire insurance as a com mercial enterprise is limited by a very important circum stance. The contracts, in the United Kingdom at least, are seldom made for a longer period than one year, and often for less, and need not be renewed on either side unless their safety and reasonableness are confirmed by experience, so that from day to day the insurance company is able in a measure to revise its terms, and to correct the errors arising from imperfect data or a too sanguine generalization. The business on the whole has been a profitable one. There have been comparatively few absolute failures of fire insurance offices in Great Britain, and none of any magnitude ; nor do British companies regard it as any distinction that "they have always paid their losses in full." The returns of those companies whose accounts are published indicate general prosperity, and the quotations of the share market and other circumstances show that the companies whose accounts are not made public have had at least equal success. The thirty companies whose experience has been already quoted received in fire premiums during the seven years 1870-76 about 37 millions sterling, and paid away for losses by fire about 22 millions, or 587 per cent, of the premiums received. After providing for expenses, there must have been a satisfactory balance of profit in proportion to the capital at risk. The conditions of the contract between a fire office and the insured are regulated partly by the terms of the document known as the policy, which embodies them, and partly by law outside these terms, resulting from custom, from statute, or from legal decisions. We will endeavour to set forth as succinctly as possible some of these con ditions, having regard chiefly to British contracts. It is in the first place a contract of indemnity. The in sured is guaranteed against loss by fire to the extent of the sum agreed on, but he is in no event to receive more than he has lost, or to make any profit by the occurrence of a fire. The sum named in the policy is not the measure but the limit of what he can recover. Nor does his policy cover all the loss he may sustain, for it will not in any case protect him against consequential damage, such as the loss of trade or of prospective profit ; and if he desire to recover, not merely the value of a building, but the loss he will sustain through its being temporarily untenantable, he must insure specially against that risk. He must have some substantial interest in the property he insures, but it need not be that of ownership, for, if he might lose as tenant or mortgagee or in any other capacity, he may insure against that loss ; and he may insure against the loss which others would sustain for whom he holds the property in any fiduciary character. It is loss by fire only that is insured against, not loss by a fall in the market value of property or by natural tear and wear. If property