RESPONSIBILITY FOR INCENDIARISM.
THERE is no writer on the daily press of this country who comprehends the importance of the fire losses and their effect upon the prosperity of the people more fully than does F. W. Ballard, of the editorial staff of The Commercial Bulletin of this city. He has made a study of the subjects of fire prevention and fire protection, and the relations of fire insurance thereto. To his knowledge of the subject he adds the ability of a ready and vigorous writer, and we do not hesitate at times to use his contributions to fire literature freely. It is so seldom that the daily press treats the matter intelligently, that Mr. Ballard has become an authority among them, and his articles are widely copied. It gives us pleasure to pay this tribute to so able and persistent a co-worker in the labor of educating the masses to a full comprehension of their responsibility for this woful waste of our national wealth.
As a people we have come to look upon this country as one of magnificent enterprises, and also with equanamity upon the opposite side of the picture, large conflagrations. Hardly a day passes that the press does not furnish accounts, not of ordinary losses alone—for they have become too common to be worthy of more than a passing paragraph—but reports of fires destructive in their nature to the extent of many thousands of dollars, and a loss not taken into account, in the throwing out of work of hundreds of hands. The casual reader glances indifferently down the page to see how much of the loss was covered by insurance, and then dismisses the matter from his mind.
In a recent article, Mr. Ballard discussed the subject of incendiarism and the responsibility of the State therefor. Herewith we give a few of the ideas to which he gives expression:
The year just closed witnessed the destruction in the United States and Canada of $i 16,000,000 worth of property. Surely this fact should be sufficient to awaken our political economists to the importance of investigating this subject with a view to mitigating the evil. The Mutual Life Insurance Company, the most wealthy corporation of its kind in the world, holds assets of $114,000,000. What a hue and cry would be raised if the bonds, mortgages and other collaterals forming this immense sum should be handed over to the flames; yet the wealth would be no more surely destroyed by this means than it has been by the fire losses of a single year. True, much of this loss was covered by insurance, but this does not change the situation a particle. Insurance cannot create wealth, it merely collects from the many to distribute among the losers ; but the fact remains that so much wealth has been made ashes and scattered to the winds.
If fire losses to this extent were normal and to be looked for as the result of accidents that could not have been guarded against, we might resign ourselves philosophically to the inevitable; but the fact is incontrovertible that a very large proportion of these fires are due to gross carelessness, and what is still more to be deplored, to willful destruction of property to collect the insurance thereon. Certainly these are not losses legitimately to be calculated upon in the principle of fire underwriting.
All this is wrong and admitted to be so, but there seems to be a difference of opinion as to where the duty lies in the correction of the evil. Legislatures have attempted to grapple with the” question and failed. The object sought for was all right, but the method wrong. The idea seemed to be that the power to check this evil rested somehow with the companies themselves. But fire insurance companies are formed to take risks as they find them. If they are to make money for their stockholders, it must be by the exercise of care and prudence in the management of their business. Certainly they will not knowingly accept a risk where they feel there is a moral hazard involved, for no rate sufficiently high could be placed thereon to protect their risk.
It is the presence of this moral hazard that adds so enormously to the losses, and it is the elimination thereof that must be sought by our lawgivers. Being clearly of a criminal nature and injurious to the interests of the community, it is clearly a matter to be dealt with by the State by penalties and punishments when the offenses are discovered. Obviously, it is out of the power of the underwriters to check this evil by any means in their power. They can exercise due caution, but that is all. The man who fires his property does not become a criminal until that act is accomplished, and it is then that the State should take decided action.
Unfortunately, there is too much inclination to look upon this crime as a sort of lesser evil, as long as human life is not involved. An individual becomes pressed in his business obligations and unable to meet the claims falling upon him. Failing to get the necessary accommodation, his store or factory accidentally takes fire. In every such case the insurance is ample, and knowing this his creditors will grant extension of time. But there is a peculiar expression in their eyes when referring to the fire, and a remark perhaps to the effect that it was “ fortunate ” it occurred just at that time. However, the pile of ashes tells no tale—sometimes.
In what manner is it possible for the companies to guard against these men who make the insurance rates so much heavier than they would be otherwise ? If a man is known to be a rogue, or if he has previously been subject to fires of the “ cause unknown ’’ variety, the companies will refuse to deal with him altogether. But this would not reach the as yet undeveloped rogue who is about to make his first venture in this line. Neither will the refusal to insure at a more than three-fourths value be effective, when it applies to portable property. The only resort then left to the companies is to use the utmost care in the selection of risks, and trust to the State for proper legislation to protect them against criminal acts.
In time of riot, if the property of corporation or citizen be destroyed, the State must make good the loss. It is the duty of the State to protect its citizens, and failing to do this it must pay the damage. Why should this not apply equally to the wanton destroyer of property ? Why should not a fire occurring from an alleged unknown cause be thoroughly investigated by municipal authority, and the insured be compelled to show whether he was in a position at the time to be personally benefitted by the destruction of his property ?
It might be objected that such an investigation would be inquisitorial in its nature; but this is exactly what it should be. The rights of one individual must give way to the rights of the many when the public weal demands it. The innocent man has no cause to fear a thorough examination in the matter, while the rogue has every reason for opposing it. It would be well for those who are always crying for cheap insurance to see why it is that rates are at the present standard. The rate of insurance must be fixed by the rate of loss. They must rise or fall together. Any attempt to lower the rate without decreasing the hazard involved will be certain to wreck the company that attempts it. That lesson was long ago learned by bitter experience, and, while men unfamiliar with the subject may organize new companies and undertake to perform impossibilities, the older and trained heads will refuse to attempt such experiments.
The remedy, then, lies with the public itself. The laws against arson should be so strict as to exert a wholesome restraint against attempting the crime, and the punishment should follow swiftly upon conviction. But fire underwriters are neither officers of justice nor detectives. In fact, anything in this line would be quickly resented if known. The State and the State alone is the proper one to act. In doing this, legislators are not acting in the interest of the companies, but in that of the public solely. That this is true is evident from the fact that the uninsured are in many cases sufferers by the destruction of adjacent insured property and the communication of the flames to their own premises.
The time will inevitably come when this question must be met and properly and practically treated. The increasing yearly losses show only too plainly that it cannot much longer be ignored. When an effective plan is found to eliminate the danger from the moral hazard, the losses and insurance rates will be so materially reduced as to astonish the public, and they will wonder why the then obvious truth was not recognized long ago.