LIBRARY 
 
 OF THE 
 
 UNIVERSITY OF CALIFORNIA. 
 
 GIFT OF" 
 
 n 
 
 I 
 
IW 
 
 
 
-4*0. D. 
 
THE VERSATILITY 
 
 OF AN 
 
 INSURANCE CAREER 
 
 BY 
 
 F. W. P. RUTTER 
 
 MANAGER, LONDON AND LANCASHIRE FIRE INSURANCE CO. 
 LIVERPOOL 
 
PRESS OF 
 
 MONTROSS, CLARKE & EMMONS, 
 51 NASSAU STREET, N. Y. 
 
 tHti 
 
THE VERSATILITY OF AN INSURANCE 
 CAREER. 
 
 44 To look at things as well as vje can to in- 
 scribe them on our memory to be observant and lei 
 no day pass 'without gathering something then to 
 apply oneself to those branches of knowledge which 
 give the mind a sure direction to apportion everything 
 its place to assign to everything its value (in my 
 opinion a genuine philosophy and a fundamental mathe- 
 sis)this is "what ive have novj to do." 
 
 THESK words of Goethe form the kernel of what 
 I propose to submit for your indulgent con- 
 sideration to-night. 
 
 When you did me the honour to invite my ap- 
 pearance before your Society, and when it was intimated 
 that there would be no restrictions in the selection of 
 a subject, I felt it would perhaps be not altogether 
 uninteresting to you, and certainly a benefit to myself, 
 if I were to attempt a survey of the manifold, the 
 kaleidoscopic, vareity of interests, which are bound 
 up with the life and work of an underwriter, and 
 the study of which must be both enjoyable and 
 instructive to every aspirant to insurance honours. 
 
After framing in my mind the skeleton of ideas 
 which the subject conjured up, and so as to avoid 
 ground already familiar to you, if that were possi- 
 ble, I had access to some of the papers which have 
 already been read before your Society, bearing in 
 several instances the names of some of the most 
 distinguished amongst the leaders of our profession. 
 Of these, I was particularly attracted and impressed 
 by the paper read to you twelve months ago by 
 one of your own countrymen, who has not only 
 won for himself an imperishable insurance reputa- 
 tion, but who excels as a profound thinker, a class- 
 ical scholar, and a polished rhetorician. He told 
 you, from the stores of his experience, the beneficent 
 advantages of philosophy and of moral culture to a 
 business man. He explained to you as with the 
 authority of one who has passed successfully through 
 the turmoil, the anxieties, the ups and downs of 
 an active business life to the quietude of a happy 
 retirement, so helpful to a calm, unfettered survey 
 of the past how a man's daily work may be 
 elevated and refined by a firm adherence to principle 
 and by the exercise of that philosophy which softens 
 the too glaring dazzle of success, and gives a silver 
 
 2 
 
lining to the dark cloud of failure and discourage- 
 ment. 
 
 To-night I confess with some trepidation at the 
 ambition of following in such footsteps I take this 
 lofty sentiment as the basis, the foundation, of my 
 remarks, and will try to picture to you the multi- 
 tudinous elements, the masses and the fragments all 
 lying heaped together, but which, combined in pro- 
 portion and with judgment, may be fashioned into 
 the structure of an insurance expert's career. 
 
 For our business is a mosaic, composed of so 
 many pieces of different material, and of such vari- 
 ety in size and shape, that it is difficult to imagine 
 how these many apparently inharmonious elements 
 can be made to fit. It is necessary, therefore, that 
 one's mind should approach the subject broadly and 
 generously, that we should be free for the nonce 
 from the technicalities of our daily occupation, and 
 see whether, not only business life per se, but our 
 own particular profession, is not capable of being 
 similarly elevated to a higher plane. 
 
 I propose, then, to touch a few chords, lightly 
 and suggestively, indicating the variety of pursuits 
 open to any Insurance man who has an enthusiastic 
 
 3 
 
interest in his business, and who is wishful to com- 
 bine them to his advantage. For one cannot but 
 acknowledge that the greater the experience of the 
 world, and the business acumen possessed by the 
 underwriter, the more fitted he must be to bring 
 to bear upon his work that judgment, that fine 
 discrimination, which are so continuously called for. 
 It has often occurred to me that, perhaps 
 
 THE HIGHEST QUALIFICATION OF AN UNDERWRITER 
 
 is the power of making up his mind, and making 
 it up both rapidly and accurately. He must not waste 
 time over it he must not keep other things waiting; 
 he must cleave his problem to the core, examine it 
 minutely, and then give his decision promptly and con- 
 clusively once for all. It does not matter whether 
 the anxious question is that of the opening of an agency, 
 of the retirement from a country, or the abandonment 
 of a treaty, or whether it shall be mending rather 
 than ending; of the selection of an official, of the 
 acceptance of a risk, or of the many other ques- 
 tions which, from time to time, arise like Hydra to 
 puzzle the brains of officials. All demand the same 
 nicety of treatment and clearness of judgment, so 
 that when, years after, that same subject, however 
 
 4 
 
small and insignificant it may have appeared at the 
 outset, becomes lit up with the search-light of some 
 exciting incident, one may have the keen satisfaction 
 of feeling that whatever the outcome, whether good 
 or ill that decision was the right one. 
 
 It is easy enough to say,' afterwards, what would 
 have been the right thing to do, because then the 
 question is illumined by the after event, and by 
 the more exhaustive and deliberate thought which 
 one can naturally give to it. But it is the first 
 judgment which must be sharp and accurate, because 
 upon it so much may depend. 
 
 The more one knows of a subject and of the 
 many side-lights which assist in the formation of a 
 judgment, the more competent one becomes to arrive 
 at an accurate conclusion. 
 
 Knowledge is power : it constitutes the expert. 
 And the true expert must be a specialist ; he should 
 not be content with the generalising of the ordinary 
 practitioner, but he should qualify as an authority 
 on as many subjects as possible, with proper discrim- 
 ination, choosing those only that are likely to be of 
 value, and the result will be a more polished personality, 
 as well as a more complete insurance encyclopaedia. 
 
 5 
 
A thoughtful journalist once termed Insurance, 
 comprehensively, as both esoteric and exoteric. Eso- 
 teric because it appeared to him to be a science 
 only understood by the specially initiated, the ex- 
 perts ; but yet exoteric, because capable of being 
 imparted to and comprehended by others. He was 
 right; and having himself since entered the ranks 
 of the Insurance profession, he has doubtless proved 
 to his satisfaction, ere now, one, if not both, of these 
 definitions. 
 
 Insurance an Insurance has, indeed, every claim to the 
 Inductive Science* title of an inductive science, a science which 
 calls for one's best reasoning powers the daily draw- 
 ing of inferences and conclusions by the microscopic 
 examination of all such obtainable data as will help to 
 throw light upon the problem, whatever it may be. 
 Science is, after all, but "the systematic classification 
 of experience." As Huxley said, "It is nothing 
 but trained and organised common-sense" The 
 premises must be true, the reasoning without bias 
 or prejudice, and the conclusion such as will stand 
 the test of subsequent events. The underwriter is 
 called upon from hour to hour to apply the mass 
 of general facts and statistics accumulated in the 
 
 6 
 
course of his experience, and to focus them upon 
 his particular difficulty. But this must be done with 
 unerring judgment, because the set of factors em- 
 ployed must obviously vary with every separate 
 case. 
 
 Statistics above all are the underwriter's sheet 
 anchor. And yet we frequently hear the phrase 
 that figures can be made to prove anything. So 
 they can, if they are confined to one side of the 
 question only, but the careful underwriter will see 
 that the figures from which he makes his deductions 
 are sufficiently faithful and complete to be relied 
 upon. 
 
 But beyond even statistics, there must be that 
 keen, sympathetic, sensitive judgment, amounting 
 almost to an instinct, which so often comes into 
 play, to confirm, or perhaps to negative, what the 
 figures seem to indicate. It is like the philoso- 
 pher's stone of the alchemist, which, applied with 
 discretion and at the proper moment, turns into gold 
 the particular transaction. It is this faculty the 
 final touch of some deep thought, or the moral 
 derived from some vital incident, and often put into 
 effect in the face of otherwise convincing statistics 
 
 7 
 
which has had such a large share in the composi- 
 tion of some of our greatest underwriters. 
 
 And yet it would not be right to suggest that 
 the science of Insurance is so occult that its secrets 
 are attainable only by a favoured few who have 
 entered the world as ''born underwriters." There 
 is nothing in our business which cannot be learned 
 by patient, unwearying application and perseverance. 
 That, indeed, is the charm of our profession. Any 
 science which takes a lifetime to learn must, if pur- 
 sued with enthusiasm, be a continual source of 
 pride, and of intrinsic value so much invested cap- 
 ital to the possessor. 
 
 Carlyle knew the value of incessant study when 
 he wrote: "There is a perennial nobleness, and 
 even sacredness, in work. Were he ever so be- 
 nighted, forgetful of his high calling, there is 
 always hope in a man that actually and earnestly 
 works. ' ' 
 
 A clever underwriter, then, must be a man of 
 genius: by which I mean either a man of excep- 
 tional gifts and intuition, or (in the application of 
 that other definition) a man of "energy, labour, 
 and diligence," "with a transcendent capacity for 
 
 8 
 
taking trouble first of all." Indeed, it is very 
 doubtful whether this taking of pains can be dis- 
 pensed with by anybody in our business. The 
 omission to give due weight to one single, and per- 
 haps apparently insignificant, fact, may involve con- 
 sequences causing deep regret and chagrin. 
 
 We are often struck by the completeness and 
 perfection of some chef (Toeuvre, whether a book, 
 or a speech, or a picture. Occasionally rarely the 
 artist, a Byron or a Herkomer, may have dashed 
 off his work with lightning rapidity ; but, as a 
 rule, the apparently perfect work or the inspired 
 pronouncement is but the result of infinite patience 
 and care. 
 
 The same guiding principle of unremitting atten- 
 tion to details must govern us if we are to achieve 
 sound results ; and it cannot but be an encourage- 
 ment and an incentive to the tyros in our profession 
 to feel that there is no roj 7 al road to success, but that, 
 by saturating themselves with their daily business 
 and by utilising such by-studies as are likely to 
 enrich their Insurance experience, there is no reason 
 why they should not attain to the highest rungs of 
 the ladder. The first step is generally the most 
 
 9 
 
difficult, but once attained it affords a firm fulcrum 
 for further progress. You remember that it was as 
 a corporal (not as a private) that Napoleon first 
 attracted attention ; and we have at all times been 
 encouraged by the declaration as true in our bus- 
 iness as in his that ' * every corporal carries a field- 
 marshal' s baton in his knapsack." Our Insurance 
 history comprises more than one Napoleonic instance 
 of that insatiable thirst for new fields to conquer 
 which was the burning characteristic of that original 
 and unequalled amalgamator. 
 
 Wnaloav Between Glancing the other day over the columns of 
 Banking a banking journal, I came across the dogma 
 
 and Insurance. ^^ < sc i ence has now supplanted crude con- 
 jecture, and expert knowledge has taken the place 
 of mere guess-work." 
 
 This may also be applicable to banking, but it 
 is certainly so to Insurance ; and indeed there is a 
 good deal of analogy between the banking profession 
 and our own ; they have a natural affinity for each 
 other. You, in the North, are aware at least of 
 one instance where a successful banker has become 
 a clever actuary, and vice versa. For Insurance is, 
 like banking, a necessity : it is no longer a luxury, 
 
 10 
 
but has become an absolutely essential factor in the 
 world's commercial machinery. Can you imagine 
 what would be the effect of the suspension of all 
 Insurance policies, say, in the great Metropolis, or 
 in your own city, for a single day ; the dislocation 
 that would ensue, the violation of contracts as 
 between mortagor and mortagee, carrier and con- 
 signee, buyer and seller, merchant and broker? How 
 many, or rather how few, are there who have not 
 responsibilities and obligations to some other party ; 
 and, whatever may be their inclination as regards 
 their own liability, the risks which they themselves 
 are running, these obligations to others often of 
 great and even unknown extent must be covered 
 if the daily routine of their business is to go on 
 without interruption. 
 
 It is sometimes said that we Insurance men sell 
 our goods, like shopkeepers ; and, this being a 
 "nation of shopkeepers," we might not unreasonably 
 accept the epithet as applying to ourselves. But is 
 it quite correct? Are we not, rather, like bankers, 
 trustees? We are entrusted with so much money 
 by so many individuals, and out of that money we 
 pay our expenses and guarantee to refund from the 
 
 ii 
 
store of our reserves of the money which has been 
 entrusted to and fructified in our keeping whatever 
 fire losses may occur to the property insured. We, 
 naturally, always endeavor to secure for ourselves 
 a small margin of profit for our trouble and work 
 just the same as the banker does on the turnover 
 of his client's accounts ; but the bulk of our divi- 
 dends are, like those of the banker, derived from 
 the judicious investment of the securities in hand, 
 and which, fortunately, in the case of the Insurance 
 Companies, largely consist of the accumulated profits 
 of past years. 
 
 There are those who still regard a life policy, 
 and even a fire policy, as they would a summer 
 overcoat occasionally useful, but generally supererog- 
 atory ; but, in the enormous and increasing number 
 of insured (not one of whom is inclined to spend 
 money if he can possibly save it), they have con- 
 stant demonstration that Insurance has not only 
 come to stay, but that year by year the number of 
 the elect must inevitably expand. 
 
 Undoubtedly the prestige attaching to the name 
 of a British Company was forged and burnished in 
 the furnace of the Chicago and Boston fires a 
 
 12 
 
,ITY 
 
 quarter of a century ago. For the Chicago con- 
 flagration alone, the amount paid was over 50 million 
 gold dollars, of which the British offices contributed 
 about one-fifth, and it must always remain as a per- 
 manent testimony to the solidity and resources of the 
 British offices that, whilst there were many companies 
 unable to meet their indebtedness, there was not a 
 single Company hailing from this country which did 
 not respond for every dollar of its liabilities. For- 
 tunate were they in having so husbanded their 
 profits as to be able to meet the blow with- 
 out default. Such an expenditure was well en- 
 titled to the unprecedented testimonial which it 
 earned, and the credit of the British Insurance Com- 
 pany still rises- higher and higher. 
 
 . . Conflagrations are unquestionably the salt of 
 
 Of our business ; without them it would lose 
 
 Conflagrations, half its charm. They are our fertilisers: 
 they impart new life and vitality into ground which, 
 perhaps, has been getting sodden and stale ; they 
 stimulate growth ; they are like ' ' bread thrown on 
 the waters," coming back to us again a hundred- 
 fold. They constitute the finest advertisement the 
 strongest vindication which a Fire Insurance Company 
 
 13 
 
can possibly desire. They demonstrate to the laity, 
 to those outside the pale of our profession, that, 
 whatever immunity we may enjoy for a time whether 
 it is for five or ten years we are never safe from 
 the possibility of a fire which may cut a large slice 
 out of a great city. And this liability is just as 
 applicable to this country and this hemisphere as it 
 is to the great countries over the seas. Formerly, 
 we used to think that a conflagration was only 
 probable in a timber town ; and yet, although in 
 the course of years, these flimsy places have been 
 gradually minimised in their number and extent, we 
 have the conflagrations still present with us, as fre- 
 quent and as vehement as ever. Timber has been 
 replaced by brick, but this improvement has been 
 offset by the crowding and over-crowding of our 
 large towns where we have now to study the mul- 
 titude of congested districts, with narrow streets, 
 high and old buildings often containing enormous 
 values of light and dangerous merchandise which, 
 once a fire has got well alight, form as fine and 
 unlimited a bonfire as ever did any town of frame 
 construction. 
 
 We may, and do, take precautions. We have 
 
the facility of the telephone, and of the electric 
 alarm if we take the trouble to instal it ; both of 
 vital utility in calling up the Brigade, a matter of 
 paramount importance, seeing that it is the first ten 
 minutes which will decide whether the fire is to be 
 stopped in its incipiency or whether it is to gather 
 strength which may grow into a conflagration. We 
 have our enlarged Fire Brigades, our modern appli- 
 ances, our automatic sprinklers, our supplies of water 
 of unlimited capacity ; and yet, with all these helps, 
 we know that we are never safe. L,et there be one 
 link missing from the chain, and all our calcula- 
 tions are upset. Was not the immense destruction 
 caused by the St. John's, Newfoundland, fire due to 
 the fact that the water supply of the town had 
 been temporarily cut off to allow of some repairs 
 being carried out? And St. John's was only an 
 illustration of what may occur anywhere at any 
 time. What power on earth can stop a fire well 
 alight in two or more warehouses in a congested 
 district with a hurricane blowing? How often has 
 it happened that a serious conflagration was only 
 averted by the dropping of the wind, or its veering 
 round to another quarter? 
 
 15 
 
We cannot, therefore, evade the conflagration, 
 and, indeed, it is doubtful whether we should really 
 benefit if it could be removed from our path. It 
 is incidental to our business ; it is the necessary 
 vindication for our Reserve Funds ; it affords abund- 
 ant food for the introspective study of the thought- 
 ful underwriter. 
 
 Sometimes the blow comes with a startling 
 cruelty at the moment when we are enjoying the 
 prospect of reporting some splendid return some- 
 times when we have already been suffering, as we 
 think, unduly, and when we are apt to echo Job's 
 lament, "For the thing which I greatly feared is 
 come upon me, and that which I was afraid of 
 is come unto me. I will complain in the bitter- 
 ness of my soul." 
 
 But what would our Fire Insurance history be 
 without conflagrations? If they were barred the 
 obvious result would be an intensifying of competi- 
 tion consequent upon the greater security, and an 
 inevitable slipping down of rates until our business 
 and our profits reached the vanishing point. Once 
 make profits easy and they are done for. It is 
 curious how, presumably in comformity with some 
 
 16 
 
mathematical law, these great fires, periodically, and 
 with fair regularity, come to waken us from the 
 lethargy which may result from over-confidence. 
 Each decade has cut its notch in the conflagration 
 record, and it is a remarkable fact that nearly every 
 such fire of serious moment has occurred in one of 
 the closing months of the year. 
 
 In 1861, Tooley Street; in October, 1871, Chi- 
 cago; in November, 1872, Boston; in December, 
 1882, Wood Street; in 1892, St. John's; and last 
 year, in October, that interesting fire in Ecuador, 
 which threw a lurid glare upon a little-known sec- 
 tion of the western hemisphere, and produced one 
 of the most puzzling problems in currency and finance 
 which the joint acumen of bankers and underwriters 
 has ever had to deal with. As I write these very 
 lines, on the night of the igih November, 1897, a 
 fateful orange-coloured envelope is placed in my 
 hand, the missive announcing that the fire-fiend has 
 had sway in the heart of London for eight con- 
 secutive hours, and swept out of existence more 
 than ninety warehouses ; and the Cripplegate fire is 
 now on record as one of the most notable conflagra- 
 tions since the historic holocaust of 1666. What 
 
 17 
 
would those owners and occupiers do for their daily 
 bread if they had not, to a considerable extent 
 at least, protected themselves against this ever pos- 
 sible contingency? If they have so safeguarded 
 themselves, they are entitled to their share of the 
 funds which have been contributed for this very 
 purpose. Fortunately for all of us, the times have 
 lately been so propitious that we can bear such a 
 blow without a tremor, and, however the burden 
 may be distributed, Fire Insurance in this country, 
 in the aggregate, is built on too solid a basis for 
 any fire that ,is not really unprecedented to cause 
 alarm. 
 
 A great Roman philosopher who was apt to 
 probe accurately, if cynically, into the depths of 
 weak human nature, has placed on record this re- 
 flection : ' ' How fascinating it is for one safe on 
 land to witness the perils of those battling with 
 the waves ! Not from any malicious pleasure in 
 the troubles of others, but because it is an inter- 
 esting study to be able to analyse troubles from 
 which we ourselves are exempt." 
 
 However true this aphorism may still be in this 
 nineteenth century, we, at any rate, can afford to 
 
 18 
 
be a little more charitable than L,ucretius, and, 
 although an office doing a world-wide business may 
 luckily escape when a fire occurs on one side of 
 the globe, the principle of averages is sure to assert 
 itself, and the same Company will doubtless have 
 its aliquot proportion when the next big fire occurs 
 at the opposite pole. 
 
 Whilst it would be false modesty to attempt to 
 conceal from ourselves the hope of each one of us 
 that when a conflagration occurs one's own special 
 Company may be treated tenderly, we must not forget 
 that, like banks, the interests of our great Fire Insur- 
 ance Offices are really bound up with each other in- 
 dissolubly, and that, if a serious disaster hits any 
 one of us, it must have some corresponding effect upon 
 the prestige of those others who may have been 
 more fortunate. 
 
 And, so, this fiery incident in I^ondon, followed 
 almost immediately by a similar occurrence at the 
 Antipodes, seems to have come with curious oppor- 
 tuneness, eloquently illustrating the never-ending 
 variety of our daily life, which every hour calls for 
 some new treatment some readjustment of our men- 
 tal compass, requiring us to be always on the alert, 
 
 19 
 
prepared to trim our sails or to alter our helm, as we 
 can never forecast from what new quarter the wind 
 may blow. 
 
 Conflagrations, then, are blessings often disguised 
 blessings but still beneficent, just as a plague or 
 an epidemic to a L,ife manager. They are painful 
 to bear at the time, but they work their own good. 
 They mostly happen in districts which are none the worse 
 for such a drastic clearance. Do you imagine that 
 if the Chicago fire, when ^33,000,000 of property 
 was swept out of existence, had not taken place, 
 Chicago would ever have become the great city it 
 is to-day? It might, perhaps, in the extent of its 
 commerce ; but it is more than likely that it would 
 have been cramped and fettered, and that the health 
 and comfort of its vast population would inevitably 
 have suffered from its poorer accommodation. When- 
 ever, then, a big fire occurs we naturally look for 
 a marked improvement in the character of the rebuilt 
 property, conferring aesthetic and practical advantages 
 on the community. 
 
 But conflagrations have another use for us : they 
 justify to the public our raison d'etre; they bring 
 up recruits, just as that historic charge at the Ridge 
 
 20 
 
of Dargai has created a new eclat and enthusiasm 
 for your famous regiment * ' The Gordon High- 
 landers." Our profits are maintained, as well as 
 leavened, by these periodical outbursts, and the 
 public have ocular demonstration that we do run 
 these heavy risks, and that we are therefore not un- 
 reasonable in asking that, for our risk, we should 
 be allowed a moderate percentage of profit for our- 
 selves. 
 
 fire Profits The principles of insurance are so closely 
 and [liabilities, allied to those of providential organisations, 
 that it would not be judicious for us to hoodwink our 
 insured, or to charge them rates which can be 
 proved to be excessive. It is proper and wise for 
 u? always to exercise a ' ' sweet reasonableness. ' ' If 
 you take the operations of all the British Companies 
 for the period commencing 1881 to date (it is im- 
 possible to go farther back if the figures are to be 
 in any way complete), you will find that the net 
 fire premium income encashed during the period of 16 
 years has been ^244, 000,000. This indicates the mag- 
 nitude of our business, but the amount must be dis- 
 tributed amongst nearly 60 Companies, and, when 
 worked out, the profit to them on this immense 
 
 21 
 
turnover, with all its risks, and with a continuously 
 increasing liability, really only represents the modest 
 ratio of something less than 6 per cent. And yet 
 this is the heyday of our cycle of prosperity, after 
 several good years which have materially assisted the 
 result, but which, unfortunately, are not likely to 
 be continued much longer, if we are to attach im- 
 portance to the regular ebb and flow which seem to 
 be invariably confined within the limits of each 
 decade. And, for this profit, we are not only working 
 anxiously and watchfully, day by day, but we are 
 all the time running untold liabilities in every quarter 
 of the globe. 
 
 In 1868, when the duty on fire business in this 
 country was discontinued, the aggregate sum insured 
 in the United Kingdom amounted to ^1,430,000,000; 
 but this liability, great as it was, has since expanded 
 by leaps and bounds. I have made a little calcu- 
 lation which leads me to conclude that, at the 
 present moment, the fifty-six British Companies are 
 running the risk of no less than ^7,600,000,000, that 
 is to say nearly twelve times the amount of the 
 total national indebtedness of this country. Surely, 
 then, our clients, and indeed our would-be rivals, 
 
 22 
 
whether Governments or Municipalities, must, if they 
 are thinking men, pause before deciding that the in- 
 surance business, with all its advantages and all its 
 hazards, is a bonanza and a monopoly. We must 
 aim, we do aim, at equity ; and if this principle of 
 fair dealing and fair treatment to every honest com- 
 petitor and to every class and trade is continued, 
 we need have no fear of inroads into the preserves 
 which we have cultivated with such toil and care. 
 We do not decry a reasonable amount of legitimate com- 
 petition ; it is as necessary as conflagrations. It pre- 
 vents undue profits, it proves to the public that we 
 are not members of a gigantic "trust." When, with 
 us, a smaller Company is swallowed by a larger, it 
 is not with- the object which is at the root of the 
 operations of so many industrial syndicates and com- 
 binations, of choking off a vexatious competitor who 
 is keeping down rates, but because the absorber, with 
 its greater resources, considers the business is worth 
 more to it than is its market value as a separate 
 concern. 
 
 No ; we do not desire excessive profits. We 
 are all aware it is a law of economics that large 
 profits attract capital, intensify competition, reduce 
 
 23 
 
rates, and so rapidly bring about the dissipation of 
 all profit, and end in a state of things much worse 
 than would have been the case if only the business 
 had remained quietly and moderately prosperous. 
 
 At the same time it is very necessary to be 
 Competition* on one's guard against the competition of 
 other countries. They are late in the field, and, 
 therefore, at some disadvantage, but they come well 
 armed, and trained by the practice of that very 
 habit of observation which is so essential to all of 
 us. Here in this kingdom we have always kept 
 peculiarly secure, but elsewhere in our colonies and 
 in the wide foreign domain only limited by the two 
 Poles to which every Britisher has been accustomed 
 to think he has a prescriptive right, we have now 
 to face a growing aggression, and in this new com- 
 petition the Germans lead the van. We have heard 
 much of late about this German competition in our 
 commercial affairs, and it has been a surprise to me 
 that it is only recently our authorities and our press 
 seem to have wakened up to the fact that our 
 business in many directions is being taken from us. 
 Ten years ago, in South America, I had numerous 
 illustrations of what is only now attracting attention; 
 
 24 
 
and I well remember being told that the Gauchos 
 of the River Plate had had to throw over the 
 Englishman for the supply of their horse-shoe nails, 
 because, forsooth, he insisted upon supplying the 
 pattern made in Birmingham, which he had always 
 been accustomed to supply to others, whereas the 
 Teuton stepped in with nails * ' made in Germany ' ' 
 of the shape and size which the Gaucho particularly 
 desired. This is the German's advantage his will- 
 ingness to adapt himself to local circumstances and 
 peculiarities, however preposterous they may seem in 
 his eyes and he couples therewith an incessant 
 attention to the most elaborate details even over a 
 small transaction which an Englishman would think 
 was not worth his while. Moreover, a German is 
 generally a better linguist I will not say a better 
 scholar, but, as a rule, knowing two languages 
 besides his own, modern languages of the countries 
 which are likely to be most useful to him. The 
 German is, above everything, a utilitarian. I 
 believe that in many schools in Germany, whilst 
 the dead languages are not ignored, they are re- 
 stricted to a course of thirty days, at the end of 
 which period L,atin and Greek are not only dead 
 
 25 
 
but buried, and all the energies of the student are 
 devoted to those European languages, English being, 
 of course, one of them, which will help him most. 
 Now this does not exactly make for culture, but it 
 is practical ; and, after all, it is a poor consolation 
 to a clever scholar and there are many such to 
 know that he has passed through the University, 
 and can recite in the vernacular many a classical 
 ode, if he is not earning as much as will keep 
 body and soul together. Classical culture is an 
 enviable acquisition, but, like an old master stored 
 away in a garret, it is of questionable value unless 
 it is allied to position and means. Forewarned, then, 
 is forearmed, and it is clearly wise that we should 
 be on our guard against the aggressions of our 
 Continental rivals, especially in our colonies and de- 
 pendencies. 
 
 Suppose we now turn to another phase of 
 moral fiazard. , , 
 
 our entertaining business the study of human 
 
 character, with its foibles and its idiosyncracies. Is 
 it not fascinating to dive into the depths of a man's 
 mind, to find out what he is really aiming at? 
 How often -has the faculty to be exercised in assess- 
 ing the value of a client? And it is quite as import - 
 
 26 
 
ant when placing his name on the books as it is 
 when his loss comes to be adjusted. 
 
 How curious and almost unfathomable are the 
 laws governing this question of moral hazard ! We 
 all know it is one of the first principles we learned 
 that it never pays to accept a doubtful client, and that 
 a fine physical risk is worth nothing, and less than 
 nothing, to an underwriter, if its owner has a shady 
 reputation. If a Company could be sure of keeping 
 its books quite clear from this taint of moral hazard, 
 it could count, at a modest computation, upon a 
 profit of 25 per cent, beyond the average. Hence, 
 we must discriminate with much nicety. The client's 
 nationality will tell us something, and so will his 
 business and his antecedents. But we must be careful 
 in our criticisms and be prepared to form our judg- 
 ments, especially in our foreign underwriting, without 
 being influenced by stereotyped prejudices. Take, 
 for example, the Turk. I know the name is not . 
 savoury, especially of late, but it would not be right 
 to ignore the fact that a well-brought-up Turk a 
 conscientious Mahommedan is often quite as good 
 as many a Christian, and that the stigma which 
 rightly attaches to his unfortunate country is largely 
 
 27 
 
due to the mass of heterogeneous nationalities from 
 every country in Europe which have made Constan- 
 tinople their home scores of adventurers, without 
 religion or principle, who have certainly left their 
 own country for their country's good, and who have 
 had a material hand in blackening the name of a 
 beautiful city and a resourceful country. It is these 
 peripatetic individuals who require to be watched, 
 and I do not care what the country is, but I would 
 give the preference to him who has grown up 
 amongst his surroundings, and has learnt to have 
 some real patriotism, as against the man who has 
 no stake or interest in his adopted country beyond 
 what he can make out of it. 
 
 I have, indeed, always entertained an affectionate 
 \ / regard for the Mahommedan ever since I visited his 
 headquarters at Constantinople, and this notwith- 
 standing the fact that at that time Insurance business 
 was victimised by a gang of depredators, who had the 
 audacity to ply their nefarious business of fire-raising 
 and blackmail in spite of such meagre precautions 
 as the authorities took to thwart them. Only a 
 week before my visit the chief clerk of one of the 
 offices, who had courageously declined to pay the 
 
 28 
 
face value of a policy because lie knew that the 
 property had been set on fire by this very gang, 
 had been battered senseless ; and for me it was a 
 novelty, although scarcely exhilarating, to find that 
 every insurance agent was in terror of assault, and 
 not only carried about a loaded revolver, but in 
 some cases had a bodyguard as well. But these 
 blackmailers were but the refuse, the scum, the 
 mixture of Maltese, Neapolitan, and what not, which 
 helps to eke out the seething mass of humanity in 
 the purlieus of Galata and Stamboul, and it would 
 be a cruel injustice to imagine that these are fair 
 specimens of the real Turk the Mahommedan who 
 loves his Koran with all its admirable precepts, and, 
 what is more, follows them. Granted that he is a 
 fanatic, that his religion carries him away, that he 
 may in his enthusiasm turn bitter and dangerous ; 
 but let us not charge him with dishonesty or decep- 
 tion until we prove him guilty. 
 
 Another reminiscence from the still further East : 
 When I first set foot in India I was placed in 
 charge of one, Sheikh Mahboob. He was called my 
 servant, or ' ( boy ' ' but he was really much more 
 than that ; he was my lifeguard, my treasurer, the 
 
 29 
 
keeper of my keys and of all my worldly goods ; and 
 at night, after hovering round in the dim light of 
 my room and tucking in the folds of my mosquito 
 net, he would lie down at the door like a faithful 
 watch-dog, and woe betide the intruder who attempted 
 to cross the threshold. Whilst he accompanied me 
 in my travels I seized occasional opportunities to 
 probe into his thoughts and the composition of his 
 mind ; I learned to admire his simple faith, his 
 affection for his family, his freedom from vice ; and 
 when I parted from that solemn, turbaned ascetic on 
 the steamer at Bombay, I could not but contrast 
 his guilelessness with the characteristics of some 
 others who had also come down to the wharf to 
 bid me adieu. You have all heard of the ''wily 
 Hindoo," and, perhaps, of the Bombay broker. If 
 so, you are already aware that it would take more 
 than a month, and more than a year to fathom the 
 ingenious intricacies of his mind. You must test 
 his statements, check his assurances, and generally 
 disbelieve three-quarters of what he tells you ; and, 
 whilst he is perfectly aware of the halo of doubt 
 which thus surrounds him, he will always come up 
 smiling with the smug conviction that he has made 
 
 30 
 
himself part and parcel of the business and cannot 
 be ousted. And so, when I was escorted on board 
 by two or three of these gentlemen, and when they 
 calmly, to the amazement of the other passengers, 
 crowned me with garlands of flowers, with a pungent 
 aroma, something stronger than that of our tube- 
 rose, I gave them, as in duty bound, my courteous 
 acknowledgments, although I could not but suspect 
 that there was a deep and interested motive lying 
 away at the bottom of these pointed attentions. 
 
 In fact, the child of nature the Indian, for 
 example, who has never had the opportunity or the 
 necessity to practise his mind in the ingenious arts 
 of our active, self-interested business life starts from 
 a better standpoint on this question of moral hazard 
 than the man whose commercial money-making in- 
 stincts are dominant. 
 
 I remember being puzzled, when in Peru and 
 Chili, as to why the Peruvian I mean the real 
 born-and-bred Peruvian was more trustworthy than the 
 Chilian, as exemplified by the comparatively greater 
 number of suspicious fires in the latter' s country. My 
 study resulted in the conclusion that, nearer the equator, 
 a man is not so active nor so grasping as he is in 
 
a more temperate latitude, and, further, that the 
 greater infusion of foreign blood and foreign methods 
 into Chili had had a deteriorating effect on the busi- 
 ness morals. 
 
 Ji o$$ Settlement ^e mention of Peru calls to mind an in- 
 itl PCfU cident which made a draft upon not only 
 
 my store of philosophy but such knowledge of 
 human nature as I then possessed. To ease the 
 tedium of waiting for a man I was bound to meet, 
 I seized the opportunity of ascending the marvellous 
 Oroya railroad, supposed to be the most interesting 
 railway, although but 80 miles long, in the world. 
 It was then, and perhaps is still, but an incomplete 
 piece of wonderful engineering, as it only ran up as 
 far as the topmost mountain passes, and had not 
 been carried down on the other side into the 
 ' ' promised land ' ' of Bolivia. The trip had its 
 perils, but also its rewards. Not content with 
 reaching the highest station (some 13,000 feet above 
 the level of the sea), we climbed up on mule-back 
 past the final tunnel at an altitude of 16,000 feet, 
 and up into the regions of perpetual snow, untouched 
 by the fierce rays of a tropical sun. The descent 
 was the most fascinating experience I have ever 
 
 32 
 
enjoyed. Seated on a hand-brake an open car, 
 little more than a plank resting on four wheels 
 with a pilot whose grip on the brake was the only 
 safeguard between us and eternity, down we came 
 in advance of the train, ready to clear away any 
 obstacle on the line ; down from the frosty, biting atmos- 
 phere, hemmed in by precipices 2,000 and 3,000 feet 
 high, through interminable tunnels black as pitch ; 
 down past hovels which went by the name of stations; 
 down into warmer air, where we threw off our rugs 
 and overcoats ; down through vineyards, and orchards 
 of granadillas, alligator-pears, and tropical fruit 
 galore ; down into the town of I,ima, our journey's 
 end. All this was but an interlude ; then came 
 the anti-climax. Hardly had I set foot on terra 
 firma than I was greeted with the news the news 
 which many a luckless branch manager just returning 
 from a holiday has so often experienced that a fire 
 had occurred, and one of our risks burnt out. It 
 was only a private house, but it was a large one, 
 and unfortunately the owner had developed a mania 
 for curios. Now, there are various degrees of trouble- 
 some loss settlements. A draper's shop which has 
 been run without books is tiresome ; a pawnbroker's 
 
 33 
 
equally difficult ; a curiosity shop still more indefinite; 
 but a private collection of expensive curios, without 
 the semblance of an inventory, is a Chinese puzzle. 
 The debris in this case was almost non-existent ; and 
 I found it more profitable to investigate the man 
 himself and his physiognomy. I concluded he was 
 comparatively honest, and that in recovering the face 
 value of his policy he did not make a large profit. 
 One item, however, was too serious to pass without 
 an argument. It was a four-post bedstead, which 
 the owner, with Peruvian vehemence, claimed was 
 not only Elizabethan, but had actually been slept in 
 by Queen Elizabeth herself. It struck me then, and 
 often since, that that illustrious sovereign must have 
 been extraordinarily peripatetic to have reposed in so 
 many beds ; and I can only conclude that her Majesty 
 has been much maligned by curio-mongers, or that 
 there is some magic about her bedsteads, which seem 
 to grow in number year by year upon, I suppose, 
 the same principle as the increase in the number of 
 pensioners of the civil war in the United States. 
 the ffCCt$ There is another aspect of this deeply inter- 
 Of CfadC upon esting subject which is often ignored. It 
 moral Ijazard does not always f u ow that trade being bad 
 
 34 
 
is the reason for losses. On the contrary, a marine 
 underwriter will tell you that he rather likes shipping 
 to be bad, because then a captain is hyper-cautious, 
 knowing that if he loses his ship he will not be 
 likely to get another. The wonder, indeed, is that, 
 as the shipping industry seems to be in a chronically 
 suffering condition, the marine companies do not 
 make regular handsome profits. But, in our own 
 fire business, the reason for the moral hazard or the 
 contrary often lies a long way from the surface. 
 Why, for instance, did we all suffer so smartly in 
 America five years ago, after the passing of the 
 high Tariff Bill? Not because trade was bad, but 
 because immense stocks of goods were hurried into 
 the country to escape the duties, and the American 
 puplic were for a time loth to take them at the 
 higher figures which, because of the new duties, the 
 retailers demanded. It is generally when stocks are 
 low, and when shopkeepers are steering their course 
 with shortened canvas under stress of bad weather, 
 that the Insurance Company seems to enjoy the 
 greatest immunity from loss. It is indeed often very 
 difficult to gauge the real operating causes for a run 
 of unusual prosperity or of depression in our business, 
 
 35 
 
but we may feel certain that these variations are 
 mostly due to the ingenious working of the wonder- 
 ful human brain, and that, if the fault does not lie 
 with the insured himself, he is probably the victim 
 of circumstances, through the disaffection of em- 
 ployees, and the net result to the Company is just 
 the same. 
 
 You have already had set up before you the 
 lofty ideal, the code of ethics, which should govern 
 one's daily business life. It is an admirable doctrine, 
 and it would not only be beneficent, but beneficial 
 to all of us, if we could but infuse a little more 
 of it into the mass of insurers whose business we 
 have to deal with. Some years ago we had a very 
 interesting case of uncertain liability discussed at our 
 Liverpool Assizes. The policy, a floating one, had 
 been effected whilst the fire was burning, and it was 
 difficult to determine whether the insured and the 
 Company, by its representative, were both aware of 
 the fire, or, if they were, whether the risk, eventually 
 destroyed, was likely to be involved. After consider- 
 able evidence, the judge, probably in a quandary, 
 gave vent to the sapient and time-worn remark that 
 "Honesty is the best policy"; to which the counsel 
 
 36 
 
promptly responded, ''No, my lord, if you'll pardon 
 me, in this case honesty would have been no policy." 
 Ji tribute to ^e fi^h of humour is indeed entitled to a 
 Rumour. prominent place in our day's work. It is 
 healthy and vitalising. It gives a fillip to many 
 an abstruse calculation and many a dry problem. 
 Eliminate it, and you put out a twinkling light 
 which often lends the one bright element in what 
 would otherwise be a burdensome task. To quote 
 again from the sage of Kcclefechan : ' * Humour has 
 justly been regarded as the finest perfection of poetic 
 genius. He who wants it, be his other gifts what 
 they may, has only half a mind ; an eye for what 
 is above him, not for what is about him or below 
 him." 
 
 How many phases of our business may be / 
 brightened by allowing ourselves to see the humour 
 so often bubbling up. Take, for example, the average 
 clause a heavy, difficult, unending puzzle, affording 
 scope for unlimited argument and difference of opin- 
 ion. It has already been dissected before your eyes, 
 by the practised hand of a distinguished vivisector. 
 You have had its vagaries shown up in public, its 
 incongruities analysed, its wording pulverised ; and, 
 
 37 
 
by a wealth of pungent illustration, you must have 
 arrived at the conclusion that language was given 
 us to conceal our thoughts, or rather our inten- 
 tions, and that it is quite possible to have a range 
 which is not a range, a floater which is a specific, 
 and, in short, half-a-dozen lines which may mean 
 two or more things, diametrically opposed, at one 
 and the same time. And thus we try to correct 
 an anomaly, and to plan some verbiage which will 
 be proof against all future assault and dispute. But 
 is this fair? Why should we at one fell blow deprive 
 our descendants of the one evergreen puzzle which 
 has afforded us and past generations so much enjoy- 
 ment and mental gymnastics? Why should we 
 attempt to make the functions of the future arbi- 
 trator a sinecure, and settle in advance the many 
 interesting problems which come up, like conflagra- 
 tions, with periodic frequency problems which are 
 ever fresh, and which, when we are not otherwise 
 too engrossed, serve to sharpen our wits and thinking 
 powers ? No ; the insurance business would be stale and 
 flat if this phase of it were to be removed from the 
 range of argument and discussion. I^et us, there- 
 fore, cling to the phrasing of our dear old average 
 
 38 
 
clauses. Formerly we used to have three, now we 
 have only two, in many places we are cut down to 
 a poor little one ; but do not, for the sake of our 
 successors, let us elucidate every syllable in this one or 
 two, so that no difference of opinion will ever again 
 arise. 
 
 Then we have the causes of our fires, always 
 an interesting and a valuable study a study which 
 pays ; for, if we can ascertain with accuracy the 
 cause of a fire, we add to our experience, and we 
 have a clue as to how to act with other risks of 
 the same character. And, amongst these causes, 
 which are generally so stereotyped and so natural 
 that we are apt to take them all as a matter of 
 course, are . we not often interested and amused by 
 some extraordinary claim or some far-fetched origin? 
 The insured, for instance, who puts his lighted cigar 
 on his billiard cloth and claims for a new table, or 
 who permits his chimney to catch fire and claims 
 that his pictures have been ruined by the ejected 
 soot and smoke, or the many curious pranks of 
 spontaneous combustion how the sun, focussing 
 through a bull's-eye pane of glass, always seems to 
 find out the spot where the greasy rags have been 
 
 39 
 
left lying. One most peculiar claim I well recollect, 
 where a man had burnt himself and his clothing by 
 a too hot mustard poultice, and whilst he could not 
 recover for the damage to himself under his fire 
 policy, he did recover for the injury to his clothing, 
 contending that, as he was not a hay-stack, he had 
 a valid claim for damage occasioned by the natural 
 heating. 
 
 You have all read from time to time about the 
 peculiarities of the Chinaman, which are well worthy 
 of study, as it takes a long time before one can 
 thoroughly understand him. I remember an instance 
 where a Chinese shopkeeper set fire to his place in 
 the course of a search which he was making for some of 
 his goods, he having, forsooth, in order to light his 
 way, fastened his candle in the socket of his curled- 
 up pig- tail. I also vividly recall the indignation 
 which I happened to excite because, when going 
 through a risk in a Chinese quarter, I had come 
 across a number of little lighted lamps and sticks 
 heaped together on the floor, which I had asked to 
 be removed, but it transpired that they were a set 
 of Chinaman's gods and illuminations, with the usual 
 joss-sticks accompanying ; and the fortunate interven- 
 
 40 
 
tion of a friend was necessary to pacify the shop- 
 keeper for the indignity which I had unwittingly 
 been guilty of. 
 
 There is indeed grim humour in the 'customs of 
 many foreign countries. One wonders how arson is 
 possible in Chili, and in Greece, seeing that in those 
 countries, when a fire takes place, the tenant of the 
 building is walked off to gaol, to escape from which 
 he must first prove his innocence. But, then, it is 
 not often that he is detained for long, as we all know 
 the elasticity of foreign courts of justice, and the many 
 opportunities for purchasing a favourable judgment. 
 
 In Peru, each nationality, Peruvian, English, 
 German, French and Italian, has its volunteer fire 
 brigade, and, I have seen three or four of them tear- 
 ing down to a fire, and then having a tussle for 
 twenty minutes or so for first possession of a hydrant, 
 by which time the mud roof has fallen in. One 
 might even come nearer home to recall an incident 
 where the same kind of rivalry occurred not fifty 
 miles from Glasgow, to the cost of the offices inter- 
 ested. 
 
 And so we could, with a little more thought, and 
 a little more time, recall many instances of curious 
 
customs and regulations abroad which are frequently 
 preposterous and incongruous, and yet afford a spice 
 to the routine of our daily work, lightening its tedium 
 and relaxing its severity. 
 
 tftt Scientific ^ ut *k* s ^ umorous phase must not be allowed 
 Accessories of an to detract from the seriousness with which 
 Underwriter. ma ny subjects require to be grappled. I 
 have already alluded to the desirable scientific ac- 
 cessories of an aspiring underwriter. Shorthand 
 should always, in my estimation, occupy a prominent 
 place. True, it does not open the door to a knowledge 
 of a country or a literature. It is, as L,ord Her- 
 schell says, but "a means to an end," but, as a 
 means, it is an invaluable stepping-stone to many 
 an ambitious junior who would not otherwise so 
 readily attract the notice of his superior officer. 
 
 A modern language is, again, an acquisition 
 better one language thoroughly than two indifferently 
 also, a knowledge of chemistry, and of electricity, 
 inestimable to the surveyor if he has sufficient time 
 and sufficient opportunity to make practical applica- 
 tion of his knowledge, so as to qualify himself as 
 a real expert. For, in this study of electricity, 
 there is little doubt that a superficial or only theo- 
 
 42 
 
retical knowledge may be dangerous, and lead to 
 embarrassing pitfalls. Electricity, that vital, mys- 
 terious power, pregnant with possibilities, has during 
 the last ten years revolutionised many sections of 
 our business, and has introduced a new factor which 
 must not be disregarded. There is strong ground 
 for the belief entertained by some of our thoughtful 
 underwriters that in America, at any rate, electric 
 lighting was accountable to a large extent for the 
 heavy incidence of our loss ratios from 1891 to 1893. 
 Any radical change, however beneficial it may be 
 in the long run, is unsettling, and may be harmful 
 whilst it is in process of adoption. Undoubtedly, 
 when properly installed, lighting by electricity is 
 safer from a fire hazard point of view than gas and 
 other antiquated methods, but it is equally certain 
 that, when electric lighting began to be freely intro- 
 duced into manufacturing risks and business premises, 
 there must have been hundreds of dangerous instal- 
 lations, with wires imperfectly insulated, exposed, in 
 contact with wood- work, or with a careless absence 
 of cut-outs, and the inevitable result would be a 
 short circuit, and disaster. It would, indeed, be 
 exceedingly interesting if we could, by some magic 
 
 43 
 
process, pick out from the host of ''unknown causes" 
 the many instances which must have happened where 
 some little defect in the electric installation due to 
 carelessness, or, perhaps, in the earlier stages, to 
 ignorance has involved the destruction of a fine 
 risk. 
 
 Photography is also a modern acquisition which 
 the surveyor can often turn to good advantage ; but this, 
 again, must not be allowed to mislead or to act as 
 a substitute for the more detail work and data 
 necessary to the true understanding of a risk. It is 
 far more important for the surveyor to give an 
 accurate description of the dangerous points of a risk 
 the location of the boiler-house, the openings through 
 the walls and through the floors, the opposing win- 
 dows, etc., etc. than to please the eye of his chief 
 by two or three artistic photographs of the exterior, 
 which show off the building to advantage, but do 
 not reveal its defects. 
 
 Day by day the surveyor must watch and study 
 every new process that is announced. The change 
 from stones to rollers in our corn mills, from mule 
 to throstle spinning in our cotton mills, the intro- 
 duction of electricity into many processes at our 
 
 44 
 
chemical works, the imminent adoption of acetylene 
 gas with its attendant dangers, and many other new 
 features coming under our notice every day, all 
 have a bearing upon our business and its results. 
 
 Again, a knowledge of values is as essential to 
 an insurance surveyor as is the faculty of taking 
 out quantities with accuracy to an architect. Before 
 a fire, it is not very material to ascertain the worth 
 of a building, because the owner of a building 
 rarely insures his property from malice aforethought. 
 But much depends upon the value of the stock, 
 and many a fire has been escaped by a smart 
 inspector detecting that the goods could not reason- 
 ably be worth the sum set upon them, which is 
 tantamount to the conclusion that the proposer must 
 have had a sinister motive in view. The honest 
 man never attempts to insure his property for more 
 than it is worth ; but he is none the less calcu- 
 lating, and frequently does the opposite, electing to 
 take some of the risk on his own shoulders, not 
 from any philanthropic motive, but in order to save 
 premium. He does so with a light heart, knowing 
 that the Company must bear the full brunt of any 
 loss that may occur up to the face value of his 
 
 45 
 
policy, and that his share of the insurance can only 
 be called upon in the event of the loss being greater 
 than the amount for which his policy has been taken 
 out. Seeing that our rates are intended to be based 
 upon the approximate hazard of each class of risk, 
 assuming a full insurance, it is remarkable that in 
 this country we have gone on so long without 
 applying the average or co-insurance, which is a 
 more self-explanatory word to specific policies as 
 well as to floaters. How rare are the instances in 
 our tariffs where this principle has been given effect 
 to and yet it is not for want of precedent, as the 
 Continent, although maintaining a lower average of 
 rates, has always recognised the perfect equity of a 
 compulsory full insurance, or, in default, that the 
 insured should bear his share of any loss, however 
 small, pari passu with the Company. It is, however, 
 a satisfaction to think that this principle, the cor- 
 rectness of which must appeal to every reasonable 
 man, is becoming better appreciated and understood, 
 and that its application is extending. In America 
 it is now more customary than it was ten years 
 ago, and, if the full co-insurance is not possible, 
 the 80 per cent, clause constitutes a very useful 
 
substitue as preventing the leakage of premiums on 
 desirable classes of risks. 
 
 To the assessor, the ability to measure up the 
 value of a risk is a prime necessity, A trained 
 adjuster having his mind stocked with a variety of 
 previous incidents enters upon each fresh case with 
 zest and enjoyment, knowing that it is almost certain 
 to add some new point to his experiences. He must 
 be a true judge of character, and the first few 
 minutes of his initial interview will decide him as 
 to whether he may enter upon the adjustment with 
 confidence and security, or whether it is a case 
 which is likely to involve many days and weeks of 
 laborious checking and discussion. In any case, some 
 expert must determine with care and minuteness 
 what is the value of every lot of goods in the 
 building, whether it be a wholesale warehouse or a 
 little shop, and the insurance surveyor should, him- 
 self, qualify to be that expert. 
 
 f rei Gxcbana* ^ he c l uestion of Exchange is one of material 
 
 interest, and even fascination, in our foreign 
 
 operations. Its vagaries are at times bewildering. 
 
 Of course, it is largely affected by the fluctuating 
 
 relation to each other of gold and silver ; and it is 
 
 47 
 
an obvious truism that if the production of either 
 of these metals goes on increasing in undue propor- 
 tion, the other must appreciate in its relative value. 
 This consideration does not affect us at home, because 
 we have the gold standard and have elected to regard 
 the shilling-piece as equivalent to one-twentieth of a 
 sovereign, although the intrinsic value of its silver, 
 if thrown into the melting-pot, is less than sixpence. 
 But it does seriously affect the commercial operations 
 of many foreign countries where silver is the standard, 
 including our own dependency of India. There they 
 have stemmed the flowing tide of silver by closing 
 the mints, and so maintained the marketable value 
 of their rupee, not at the 2s. which it used to be 
 (although it contains at least as much silver as our 
 own florin), but at two- thirds of that par value, 
 which is, at any rate, better than the is. which 
 would have been the inevitable rate if no such check 
 had been created. Again, in Chili they have adopted 
 a standard sterling value for their dollar which, 
 whatever effect it has had upon the commercial 
 ramifications of that country, has certainly enabled 
 us to keep our Chilian accounts upon a level basis, 
 instead of their being subject to constant fluctuations. 
 
Although perhaps not absolutely essential, it is always 
 an advantage to a foreign department official to 
 understand the why and the wherefore of these 
 curious fluctuations in foreign exchanges. Why 
 should the Brazilian milreis have fallen from 2s. to 
 yd. unless it is that a republic, in lieu of an empire, 
 portends unsettlement and insecurity? It may mean 
 an abnormal issue of paper money, which must, of 
 course, bring its own Nemesis. I well remember 
 when I was in Peru that there were two kinds of 
 currency, the one " soles [or dollars] bilhettes," which 
 were the old paper dollars issued before their war 
 with Chili, but which had fallen until they had then 
 reached the sterling value of a penny-half-penny 
 surely a record value of any dollar still in currency. 
 The Peruvians had, however, shortly before, pulled 
 themselves together with a wrench, and had issued 
 a new currency of handsome silver dollars, each 
 containing its full value of bullion ; and, although 
 they passed as dollars, and as such worth only 
 33., they were quite as large and weighty as 
 our 55. -pieces. This was going to the opposite 
 extreme : a drastic and weighty remedy, as you 
 would realise if you had been compelled to carry 
 
 49 
 
away seventy of them in exchange for a ^10 note. 
 But perhaps the most curious exchange incident 
 which I recall, was in Uruguay. There, with all their 
 revolutions and their peculating Presidents, they have 
 a gold standard ; and it felt like home to hear that, 
 whilst their gold dollar was the standard coin, the 
 English sovereign was accepted as equally standard. 
 My patriotism, of course, decided me to have so many 
 sovereigns, according to the rate of exchange then 
 ruling, in lieu of a debit of ^10 on my letter of 
 credit. You may imagine my astonishment at receiv- 
 ing not only the ten sovereigns, full par value, but 
 nearly a dollar in silver coins as well. At first I 
 assumed there was a mistake, but the cashier ex- 
 plained to my satisfaction that at that moment 
 English sovereigns w r ere at a discount, that they 
 consequently wished to get rid of them, and that, 
 after charging for the bank's own commission, the 
 surplus silver was really so much compensation to 
 me for taking them off their hands to off-set the 
 freight which they would otherwise have had to pay 
 for their voyage home. This reflection upon our 
 national coin was rather a shock to my patriotic 
 sentiments, as, however we may depreciate our country 
 
 50 
 
amongst ourselves, we are imbued with a very pug- 
 nacious feeling on its behalf when abroad ; but I was 
 content to leave with the consolation that if I could 
 only carry out similar financial transactions ad infini- 
 tum, I might possibly by the end of my tour become 
 a rich man. Nevertheless it did, and still does, 
 seem singular that one should have had such liberal 
 treatment in a far-away republic which has always 
 had a foremost place in all matters of bribery and 
 corruption, although I should add for your satisfac- 
 tion that the bank was an Knglish one, and the 
 cashier a Scotsman. 
 
 Another of our anxieties which, again, how- 
 ever, affects only our foreign operations is 
 that of Taxation. How few of the public, or even of 
 our shareholders, in scanning our annual accounts, 
 realise that such a material percentage of our expense 
 is due to the impositions which we, the trustees for 
 the provident, are compelled to pay to the relief of 
 those improvident individuals who neglect to avail 
 themselves of insurance protection. Occasionally, 
 especially in South America, where hard cash is at 
 all times the paramount desideratum, this taxation 
 amounts to extortion, and its burden is so intolerable 
 
as to make it impossible for foreign Companies to 
 remain. Such Governments are oblivious to the 
 detrimental effect which this repression must inevitably 
 have upon the best interests of their own people. 
 It is like the short-sighted policy of Turkey, which 
 has gone far to ruin its own commerce by trying 
 to put a duty upon every parcel of merchandise 
 passing through Constantinople, regardless of the 
 inevitable consequence that the merchandise of the 
 interior and of the neighbouring States must find its 
 way to the West by other channels. 
 
 If, through onerous taxation, foreign Companies 
 are expelled from a country where they have been 
 operating, it is easy to see that the inhabitants 
 of that country must either go without protection, 
 which deprivation cannot but have a baleful effect 
 upon their commerce, or they must be dependent 
 upon their local resources, which are often inadequate 
 and, as at Chicago and Guayaquil, must collapse 
 with serious loss to the community when disaster 
 arrives. Protection, reciprocal protection and for 
 those States which, unlike our own great country, 
 cannot afford to do without it is often the essence 
 of political economy ; but if it be allowed to hamper 
 
 52 
 
trade and cripple competition it only acts as a boome- 
 rang and punishes the very people whom it is sup- 
 posed to benefit. In the United States, the British 
 insurance company has always found a great open 
 field, generous and fair enough to welcome it on 
 comparatively equal terms. In many of their trans- 
 actions with this country our friends across the ocean 
 have earned a reputation for great cuteness and 
 "having the best of the deal." The English in- 
 vestor has, from time to time, been of great utility 
 to American syndicates for ventures which would be 
 regarded with derision if offered on the spot. But 
 in our business we have, on the whole, had fair 
 and friendly treatment. We have earned for our- 
 selves a name for strength and rectitude, and that 
 will ever constitute our title to the support of the 
 American public. With our roots on the other side 
 of the Atlantic so firmly planted, and possessing as 
 we do the sympathies of the insuring people them- 
 selves, it would be both unwise and difficult to turn 
 the screw of prohibitive protection on to us. Already 
 we pay smartly for the privilege of running the 
 risks we do, and facing the violent oscillations to 
 which our business in America is subject ; and I 
 
 53 
 
fancy that if the extent of taxation to which we 
 are subjected were better realised by the public 
 themselves, they would see the wisdom of some 
 modification. If for instance, we are taxed 3 per 
 cent, on our premiums, in a particular State, and 
 if, as I have shown, a 6 per cent, profit on an 
 average of years is the most we can reasonably 
 anticipate, it follows that, at best, for every 6 we 
 make for our shareholders we must pay $ to the 
 State. Indeed, when a tax is levied on premiums 
 and not on profits, its incidence is not only a serious 
 burden, but it must often be paid when the Company 
 itself makes an actual loss. It is a penalty on the 
 turnover, not on the realisation, and it is therefore 
 really a tax on capital rather than on income. 
 Seeing, then, that the American Companies them- 
 selves are in many cases also punished in the same 
 way, it strikes one as curious that fire insurance 
 Companies, operating as they do in the real interests 
 of the community at large, should have so long sub- 
 mitted to impositions which would seem to any other 
 commercial concern as illogical and impracticable. 
 tb* Selection But, apart altogether from the intricate details 
 Of Officials. O f our business, there is, for those who have 
 
 54 
 
risen to positions of responsibility and command, 
 the function I may even say the privilege preg- 
 nant with consequences, of selecting men for other 
 positions. Whether it is the choice of a new recruit, 
 the youth who may perhaps have in him the makings 
 of the eventual manager, or of some prominent 
 official, the plenipotentiary of the Company in some 
 important place on some serious mission, the same 
 care and judgment must be exercised if the results 
 are to justify the appropriateness of the selection. 
 
 An astute diplomat, steeped in the arts and 
 intrigues of his life-long service under Monarchy and 
 Directory, Consulate and Empire, gave utterance to 
 this final reflection : ' ' That the art of putting men 
 in the right place is first in the science of govern- 
 ment, but that of finding places for the discontented 
 is the most difficult." 
 
 One would almost suppose that Talleyrand must 
 have had some experience of the inside of an insur- 
 ance office. For it is certain that the character of 
 the appointments which we make is of the very first 
 importance in its bearing on the subsequent results, 
 and that, on the other hand, it is a frequent difficulty 
 and anxiety when a vacancy arises to find exactly 
 
 55 
 
the suitable man for the requisite position. Vacancies 
 and new openings are occurring every day ; there is 
 a large field for enterprising, qualified enthusiasts ; 
 and, although the vacancy not infrequently arises 
 when the appropriate man is not available, one may 
 always know that the more qualifications one pos- 
 sesses of combined tact, judgment, and experience, 
 the greater the chance of being selected for some 
 more important position when the opening actually 
 occurs. 
 
 Cbt faculty "^ * s an ax i m that, to every man, whatever 
 Of Observation, his business may be, the faculty of observa- 
 tion is of paramount utility. Unless one watches 
 a V what is going on, observes the habits and the strong 
 points of others, ready at all times to adopt a new 
 principle or to appreciate the effect of a new light 
 cast upon an old subject, one's interest in life is limited, 
 and the experience which forms our capital is warped 
 and checked. ' ' Observation more than books, experi- 
 ence more than persons, are the prime educators." 
 We must be taking mental notes all the while, for 
 we never know when the little incident, or the 
 unassuming bit of fact which seems to have no par- 
 ticular significance at the time, may eventually be 
 
 56 
 
the one element to help us to decide some perplexing 
 question. Many of you have heard from the lips 
 of one of our greatest underwriters the frequent 
 dictum : ' * Give me an ounce of fact ; it is better than 
 a ton of theory." And this motto, " Facia, non 
 verba" was not a mere saying with him; he applied 
 it daily, seizing with avidity upon every scrap of 
 practical testimony which his comprehensive, master- 
 ful mind did not already contain. 
 
 And this habit of observation can be cultivated. 
 It may be that our horizon is limited, that we are 
 confined to one department of our business, or to 
 our own immediate neighbourhood, or, at best, to 
 the borders of our own country. Kven so, it is rare 
 that a day ,will pass without impressing upon us some 
 point, some new idea or factor which we can turn 
 to our advantage. 
 
 Undoubtedly, however, the wider the field the 
 greater the opportunity. It is an immense ad- 
 vantage to have rubbed shoulders with the world, 
 to have had the chance of studying the ways and 
 methods of other countries and peoples. We are 
 called an insular nation. Many foreigners the French, 
 for example regard us as a bundle of conceits and 
 
 57 
 
prejudices. And, even after stripping the insinuation 
 of its envy, there is a great deal of underlying 
 truth about it. You Scotsmen, who have placed a 
 girdle round the globe and established yourselves in 
 every country worth living in, know very well the 
 signs of the new arrival, untra veiled and inex- 
 perienced ; how he seems to take it for granted that 
 the world is his oyster, and nobody else's ; and that 
 his very nationality has conferred upon him the 
 privilege of opening this oyster at his own sweet 
 will, regardless of those who come in his way. He 
 assumes, as a matter of course, that his own lan- 
 guage should be, and must be, dominant ; that it 
 should not only carry him everywhere, but that if, 
 in his travels, he comes across those who cannot 
 respond in English, it is they, like Stephenson's 
 cow, and not he, who must get out of the way. 
 If he has business in hand, he follows the same 
 principle, and is surprised if the foreigner does not 
 at once see the superiority of the Englishman's 
 methods to those which he has all his life been 
 accustomed to. There is a beautiful audacity about 
 all this, and we cannot but admire it. Cest mag- 
 nifiqzie, mats ce rf est point la guerre. 
 
 58 
 
It may make us feared and admired, but it will 
 not pay. The time has gone by when we can 
 think that, because we are Britons, we must com- 
 mand the market, and that it is quite unnecessary 
 for us to adapt ourselves to the requirements of our 
 customers ; that our customers ought, on the con- 
 trary, to be proud that they are privileged to deal 
 with us. The Englishman insurance man or other- 
 wise must now have all the qualifications and all 
 the pliability required to compete on equal terms 
 with his foreign competitors, and must always be 
 ready to observe and adopt their methods, when 
 those methods are likely to aid him in holding his 
 own. 
 
 the Life Branch But tbere are man y of y u present whose 
 interest and whose occupations are devoted 
 to other branches of our great profession than that 
 of fire insurance, of which alone I can pretend to 
 speak with any confidence ; and when we put on 
 one side the technicalities and the special features, 
 I think we may say that the same broad principles 
 govern them all. And what an infinite variety of 
 branches there are ! First and foremost are our 
 actuaries, with their elaborate mathematical computa- 
 
 59 
 
tions, enabling them to forecast the future with such 
 terrible accuracy. Of all our departments, surely the 
 science of life insurance is the most absolute. The 
 only real uncertainty appears to be the continuous 
 fall in the rate of interest, which affects correspond- 
 ingly the yield of the funds held in trust, and 
 consequently the complexion of future bonuses, and 
 perhaps, even, rates of premium. 
 
 And yet this, again, has been offset by a gradual 
 improvement in the mortality, thanks to our greater 
 attention to sanitation, and perhaps not less to in- 
 creased medical skill. 
 
 After all, the Psalmist's idea of a reasonable 
 time of existence for a healthy male was a pretty 
 fair estimate of the average human life as we find 
 it to-day ; and year by year, with the improvements 
 in our methods of living, and of appliances to meet 
 and check epidemics, the fluctuations in the aggregate 
 mortality experience must be very unimportant. 
 
 Indeed, to an outsider, it would sometimes seem 
 almost as if the actuary had succeeded in removing 
 his particular branch outside the sphere of what is 
 generally understood as insurance. For the basis of 
 insurance is a provision against chances, a scheme by 
 
 60 
 
which the individual is secured in the event of the 
 unlikely thing happening. But if these chances can 
 be gauged with comparative accuracy, the science 
 becomes a very exact one, and the element of chance 
 is largely removed. The fire risk may not burn, the 
 ship may survive its risky vo3^ages and at the end 
 be broken up in some secluded dock, but every one 
 of us must die. The actuary can therefore pursue his 
 course placidly and studiously, calculating to a nicety 
 the probabilities, and unruffled by the shocks of con- 
 flagrations and hurricanes which beset his confreres. 
 Again, competition amongst Life Companies has 
 led to many novelties, and not only is it possible 
 for both the rich man and the poor man to take 
 out policies in accordance with their respective cir- 
 cumstances, whether under the minimum premium 
 system, or by a limited number of payments, or even 
 by a lump sum down, but a very important place 
 in L,ife business is now occupied by what is simply 
 a method of judicious investment. If, for instance, 
 it is possible to entrust a I^ife Company with ^1000, 
 on the condition that at death that sum is returned, 
 and that in the interim an annuity at the rate of 
 3 per cent, be paid, that means that the Company 
 
 61 
 
is willing to take the risk of the double chance of 
 the policy-holder living or dying, and the transaction, 
 so far as the individual is concerned, is really the 
 entrusting of so much money on certain conditions 
 to a Company whose permanence and financial strength 
 remove from the investment all likelihood of risk or 
 anxiety. 
 
 There is no finality in the mental occupation of 
 a lyife official. His schemes are legion, and each 
 new feature as it is announced contains some fresh 
 variation some special attraction. With commuted 
 bonuses endowments the adoption of the non-for- 
 feiture plan indisputable policies threefold options 
 the occasional waiving of medical examinations the 
 increase in surrender values our Life friends vie with 
 each other in catering for a wide-awake, exacting 
 public, always intent upon securing a return of at 
 least 2 is. for every 2os. deposited. 
 
 the Ittarlnc The Marine underwriter also has his science, 
 Underwriter. but it is more closely allied to that of his 
 Fire colleague. With all his skill, his results are 
 ever liable to be affected by some rude turn of the 
 wheel of Fate. Marine, like Fire, business is the 
 essence of real insurance, protecting against accidents, 
 
 62 
 
probable and possible. The probabilities are easily 
 calculated, but the possibilities are unlimited, and 
 frequently tear into tatters the finest web of care- 
 fully thought-out expectations. 
 
 I know it is incorrect, but there is a general 
 impression that Marine business is free from the 
 uncertain and disturbing element of moral hazard 
 with which our Fire officials have to contend. This 
 impression is doubtless due to the fact that a Marine 
 policy is usually a valued policy, which means that, 
 in the event of total loss, the full sum insured must 
 be paid without deduction, even if the underwriter 
 has reason to suspect that the ship or the cargo 
 was not worth that amount. This system is doubt- 
 less indigenous to Marine business, and could not be 
 eradicated even if it were expedient to do so, but, 
 with us, a valued policy is regarded as heterodox 
 and dangerous, in that it would take out of our 
 hands almost the only check which we possess 
 against the wiles of fraudulent clients. Another 
 difference between us is that, very often, a Marine 
 underwriter can anticipate and hedge a loss by re- 
 insuring, and it must often be a pleasurable relief 
 to his daily anxieties to watch the rate of a ship 
 
 63 
 
which, when first reported as overdue he has re- 
 insured at 5 guineas per cent., mounting up to 20, 
 50, 80 guineas, until at last all hope of the vessel 
 ever arriving is abandoned. The keenness of com- 
 petition the difficulties of combination the tempta- 
 tions to include in a Marine policy Fire and other 
 risks which rival underwriters, and specially Lloyd's, 
 may have included the numberless interpretations 
 placed upon that hardy definition "particular aver- 
 age" the intricacies of Marine Insurance law which 
 has now such a bearing upon so many commercial 
 and shipping transactions all lend to the life of the 
 underwriter the necessary variety and zest, and afford 
 ?cope for the enquiring, penetrating mind. 
 bC Unlimited SCODC And what shall I say of the many other 
 Of OW Profession, branches of our profession, each having in 
 view the protection of the individual against some 
 chance or contingency of which he does not care to 
 run the risk himself? 
 
 'His person, his well-being, his property, his 
 probity, his liabilities to others, can all be provided 
 for : accidents, sickness, storms, burglary, boilers, 
 live-stock, plate-glass, mortgage, fidelity, employers' 
 liability, commissions and profits insurance safeguards 
 
of every kind and variety, growing in number and 
 in significance every day, to meet the increasing 
 necessities and fancies of a public which, in this 
 advanced age, has become accustomed to employ 
 every accessory calculated to add to its security and 
 comfort. 
 
 It would assuredly be a rash thing to attempt 
 to define the limits of our many-sided profession, 
 for it has no bounds. If the expansion and the 
 novelties of the last twenty years are any criterion, 
 what may we expect of the future? Looking back, 
 we see a widening road tramped down by the feet 
 of an ever-growing army of workers led by many a 
 general who has spent the best of his life in the 
 service of his Company, and whose achievements 
 prove how much can be attained by persistent well- 
 directed enthusiasm. Booking forward, we see a 
 vista reaching to the horizon, replete with endless 
 possibilities. L,ike the Alpine climber, no sooner 
 have we attained the summit of the height which 
 we think is our goal, than we see another range 
 beyond, still higher and equally alluring. As it is, 
 our business is full of charm and fascination, and 
 it is none the less so because we cannot penetrate 
 
 65 
 
into the developments and the destinies of the future. 
 Assuredly, there are still 
 
 "more things in heaven and earth 
 Than are dreamt of in our philosophy." 
 
 We have always something ahead of us to beckon 
 us on, and we have the ceaseless incentive to learn 
 all we can and to do the fullest justice to our 
 powers, for we never know but what some particular 
 forte or acquisition which has been lying dormant 
 for years may be called suddenly into play. Your 
 own Scotch proverb says : ' ' Keep a thing seven 
 years, and you find a use for it." 
 
 V J And so with our qualifications. We must observe 
 and we must practise ; we must store up the accu- 
 mulated atoms of our daily experience, and keep 
 them against the day when they may be wanted. 
 We must persevere, and we must be philosophical 
 not with that hesitating, sceptical philosophy which 
 Keats said would 
 
 "Clip the wings of an angel," 
 
 but the philosophy which will keep us calm and 
 unruffled in the time of trouble, and even still more 
 so in the hour of our brilliant prosperity. 
 
 66 
 
And thus, going through life with eyes and 
 ears open, eager to receive, and ready to assimilate, 
 the thousand impressions and experiences which sur- 
 round us, we shall add to our store of knowledge 
 and to the many qualities which are likely to help 
 us in our strivings for success. 
 
 Or 
 
 6 7 
 

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