Conservative influences.—We have already seen the influence of governmental organization upon various phases of production; but the chief fostering influence is the general stability of a community, not only in its laws, but in its customs and habits of life. Security in property rights is a chief condition for accumulation of wealth, and a still more necessary condition for industry. Not even want will drive people to industry when there is no certainty of possession when the work is accomplished. The fruits of industry must be safe. While the laws of the country are naturally considered the guardians of rights, the customs and habits of the people, the actual origin of laws, are even more important. Bad habits actually nullify good laws, while bad laws may be made quite endurable by good customs. Thus, the welfare of every community depends upon a conservative social influence, preventing abuse of opportunity for injury and stimulating individual energy. The rights of life, liberty and property must first be dear to the mass of the people before laws can be framed for their protection. This is especially true in a self-governing people, but is essentially the same in the most absolute tyranny. So the chief safeguard for every kind [pg 225] Nature of insurance.—The fundamental activity in accumulation of wealth is foresight; but no foresight can prevent all disasters. Fire, flood, wind and wave are beyond control, because in some sense they are beyond knowledge. Against such forces no foresight can secure. The name insurance is given to every method by which the burden of such unforeseen losses is provided for beforehand and fairly distributed. The average of such losses can easily be estimated by experience. Statistics show a wonderful uniformity in the misfortunes of life as well as, the fortunes. Even though chance be an element in every transaction, the average of chances can be distinctly calculated; and that average is essentially constant among a sufficiently large number of instances. [pg 226]All are familiar with the application of such calculations in fire insurance. Among ten thousand houses a certain number will be destroyed by fire every year, provided those houses are widely distributed under essentially similar conditions. The ten thousand house owners can insure each owner against entire loss of his house by mutual agreement to meet their share of the total loss. If ten houses are burned, each of the ten thousand house owners will pay one-thousandth part of the total loss, making a burden easily provided for. If at the beginning of the year each has laid aside this sum, the loss will be met when it occurs without disturbing the welfare of any. The machinery for such provision is called an insurance company, and the separate payment of each house owner is the premium or award expressing his share of the provision. This principle of estimating losses and providing a definite way of meeting them is the same in all forms of insurance. It has been recognized for hundreds of years, but only recently has entered into the business life of the world in all directions. For a long time false notions of reverence for the power that wields destiny stood in the way of such distribution of misfortune; but now the mass of people everywhere regard such foresight in united sympathy as natural as the planting of crops. Various methods of insurance.—Satisfactory insurance rests upon certain definite business principles which every insurer may wisely study. There are various devices for accomplishing the same end. A body of men sufficiently large to make the average of losses uniform may bind themselves by a simple agreement to [pg 227] This is a simple mutual insurance company, upon the assessment plan. Its weakness lies in the comparatively slight interest taken by each member in the selection of its officers, in the absence of security for the payment of assessments when needed, in the long delay liable to attend collections, and the uncertain interest of the officers in exact adjustment of losses. Such companies are liable to be too small to give a fair average of losses, and in any serious emergency to fail for want of expert business ability and trustworthy character in officers. If, instead of the assessment after losses, a definite percentage of probable loss is paid in advance, the responsibility for use and maintenance of such funds calls for a business character and ability in the officers which usually secures better results. It especially avoids the danger of slackness and failure on the part of the insurer. It leads to closer scrutiny of actual losses, and helps the insurer to more carefully measure his interest, since he already has an investment in the business. Any [pg 228] A joint stock company, insuring with definite premium, is likely to bring the best business management, the quickest though not always the fairest adjustment of losses, and the confidence of the business community. Its prosperity, however, is hindered somewhat by the common judgment that the interests of the stockholders must be against the interests of the insured. The actual cheapness of insurance depends not so much upon the amounts paid from time to time as upon the actual quality of the insurance purchased. Assessment companies of all kinds, without a legal lien upon definite property, are decidedly lacking in quality, since their guaranty of payment involves the financial credit of every person insured. No one should be deceived by the promise of insurance at cost, until he knows exactly how genuine that insurance will remain during the period of years for which he desires it. Governmental control of insurance.—The essential importance of insurance and the difficulties of providing [pg 229] The desirability of insurance by government direct is questioned so long as governments themselves are unstable and popular will favors laxity in the business machinery. That insurance could in this way be made cheaper is a matter of doubt while great masses of people magnify their claims against government and minify their obligations to it. Frauds against government in both taxes and claims are proverbial. At any rate, governments will not wisely undertake the indefinite applications of insurance until larger experience and wider acquaintance with the methods in vogue are reached. Applications of insurance.—The applications of insurance are indefinite in variety. There is no limit to the possibilities except in the lack of experience to settle the average of hardships. Insurance of property against fire and storm is well understood and almost everywhere practiced. Insurance of life is almost equally extended, in which the head of a family may in a measure [pg 230] There is no conceivable limit to the possible applications of the principles of insurance. It seems possible that a body of business farmers, subject as they are to so many disasters from weather, insects and contagious diseases of stock and vegetation, might devise methods of equalizing and diminishing the disaster from such losses in a common system of insurance. As a basis for such systematic action, careful statistics for large regions of country are absolutely necessary. With such losses clearly presented and averages fairly estimated, insurance would be just as feasible as it is now against fire. It will be wisely undertaken first upon such matters as can be most definitely measured in dollars and cents. Losses from accidents to teams and other live stock have already been studied and insurance to a limited extent attempted. The difficulties of such insurance [pg 231] |