ADDRESS 
 
 OF 
 
 Hon. James V. Barry 
 
 Insurance Commissioner 
 of Michigan 
 
 Before the Business Men’s 
 Conference 
 
 AT 
 
 NASHVILLE, TENNESSEE 
 January 30, 1909 
 
\ 
 
Digitized by the Internet Archive 
 in 2016 
 
 https://archive.org/details/addressbeforebusOObarr 
 
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 Address of Hon. James V. Barry, Insur- 
 ance Commissioner of Michigan, 
 Before the Business Men’s Confer- 
 ence at Nashville, Tennessee, Jan- 
 uary 30, 1909. 
 
 I am constrained to congratulate you upon the fact that 
 you are citizens of the first state to give the great question of 
 fire waste specific treatment in a manner designed to focus 
 upon it the attention of all the citizens of the commonwealth 
 and awaken them to a sense of their responsibility and their 
 duty to aid by every means in their power in the work of 
 lessening the great waste which is daily depleting the re- 
 I sources of the state and nation 
 
 i Tennessee is the pioneer in this state wide movement and 
 it is to be hoped that its example will speedily be emulated 
 to the end that all the people of all the states may, at an 
 ' early day, join enthusiastically in a determined effort to ma- 
 terially reduce the enormous fire waste which in this country 
 now averages a quarter of a billion dollars annually. 
 
 
 Timely Meeting 
 
 Your coming together today is timely. Just now, when 
 the Chief Executive of the Nation is calling upon the people 
 to carefully husband and conserve the resources of the 
 country, it is indeed fitting that you, representative citizens 
 of a great state, should gather together to devise ways and 
 means of guarding a large portion of the material wealth of 
 the state from destruction by fire. 
 
 Every fire, however small, wipes out of existence more 
 or less of our natural resources, to which the labor and in- 
 genuity of man has given an added value, the loss thus 
 being greater than if the raw product alone had been de- 
 stroyed. It is well to emphasize the fact that property de- 
 
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stroyed by fire is gone forever. While it may to some extent 
 be replaced, it can never be restored. 
 
 An impressive demonstration of what the duty of the 
 people of this country is in respect to the great problem 
 which engages your attention today and how they can con- 
 tribute to its effective and successful solution, is to be 
 found in the few figures which constitute such an important 
 feature of the call for this convention which was issued over 
 the signature of the distinguished insurance commissioner 
 of this state. This brief statistical statement shows that 
 whereas the average annual per capita fire loss of six of the 
 most important countries of continental Europe was but 33 
 cents, the average per capita loss in the United States, end- 
 ing December 31, 1907, was $3.02. 
 
 This vast difference in favor of the countries across the 
 sea is not the result of chance or magic. It is due simply 
 and solely to an appreciation on the part of the people of 
 those countries of their obligation to themselves, their neigh- 
 bors, their country and to posterity to preserve that which 
 exists so that they and those who come after them may enjoy 
 and be benefited by its use, and to the enactment and en- 
 forcement, as the result of such appreciation, of laws and 
 ordinances designed to protect and preserve it. 
 
 We of the United States can do as well in this respect if 
 we will but give attention to the matter and having once 
 impressed ourselves with the seriousness of existing condi- 
 tions, set about to correct them. It is doubtless true that 
 allowance should be made for the rapid development of this 
 country and the greater energy and activity of our people, 
 but, after making due allowance for all this, it is still a 
 national shame that is little short of criminal that we should 
 permit such vast values to be annually destroyed through 
 carelessness, negligence and crime, without rising in all our 
 might as states and as a nation to put a stop to it. 
 
 A comprehensive idea of the obligation of the state in this 
 respect can be gained by even the casual study or considera- 
 tion of the methods pursued in those countries which have 
 an enviable loss record. We find that there every phase of 
 
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the question is given careful and painstaking attention by 
 the law-making powers and that carelessness, negligence and 
 crime in connection with fires is punished in a manner that 
 most effectively discourages indulgence in any of those 
 fruitful causes of fire waste. 
 
 Broadly speaking, practically nothing is done officially in 
 this country to prevent the destruction of property by fire. 
 We have, to be sure, in the cities throughout the various 
 states, expensive fire fighting apparatus and more or less 
 efficient fire departments. But all this enormous expenditure 
 is designed to control fires after they have once started. In 
 this connection an ounce of prevention would be worth far 
 more than the pound of cure provided, for it would not only 
 save great values from destruction and preserve them for the 
 use and enjoyment of the people, but it would also render 
 unnecessary the expenditure of much of the great sums that 
 are tied up in fire fighting facilities. Our laws and ordi- 
 nances dealing with building regulations and kindred mat- 
 ters are more honored in the breach than in the observance. 
 
 To Prevent Fires 
 
 To my mind, one of the great obligations of the state is to 
 exercise its authority through its legislature and incident- 
 ally through its various municipalities to set in motion every 
 agency that will contribute in any appreciable degree to the 
 prevention of fire. 
 
 This authority should extend to the enactment of laws 
 governing the construction of buildings, the installation of 
 heating and lighting plants, the use of combustibles of all 
 kinds, the storing of explosives or readily combustible ma- 
 terials, the protection of forests and the safeguarding of ex- 
 posures. It should also provide laws and ordinances that 
 will penalize carelessness and negligence and bring swift and 
 severe punishment to the criminal. 
 
 Under existing conditions, as every one knows, the man 
 who carelessly or negligently permits his property to be de- 
 stroyed by fire reaps his reward by being permitted to collect 
 whatever insurance he may have been thoughtful enough to 
 
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provide, while his innocent and possibly uninsured neigh- 
 bor who loses his all through such carelessness or neglect is 
 permitted to shoulder his loss with what grace he may be 
 able to command and to humbly thank the person responsible 
 for his misery that his life was not included in the sacrifice 
 demanded of him. 
 
 The state can do much to control the situation by creating 
 and maintaining an efficient department for the investigation 
 of all fires and having discovered the causes thereof to pre- 
 vent, through publicity, punishment or correction of condi- 
 tions, other fires from like causes. 
 
 Some states have fire marshal departments which are more 
 of a menace than a benefit. Unless such an office is admin- 
 istered vigorously, intelligently and without fear or favor, it 
 might far better be abolished, for failure to thoroughly in- 
 vestigate every fire and deal with the cause thereof in a 
 manner that will effectively prevent a repetition is simply a 
 pretense and a sham wholly unworthy of any state. 
 
 The state can further fulfill its obligations to reduce fire 
 waste to the minimum by refraining from encouraging such 
 of its citizens as may not be possessed of a healthy sense of 
 the proprieties, to dispose of their property to the fire in- 
 surance companies at a profit. The true function of fire 
 insurance is to indemnify the insured for a loss sustained. 
 Worse than violence is done this principle when, through 
 enactment or otherwise, the insured is permitted to profit 
 through the destruction of his property by fire. Such enact- 
 ments not only make it possible for a person to secure, with 
 the sanction and aid of the state, that to which he is not en- 
 titled, but it also encourages him to jeopardize the property 
 and lives of his neighbors, a condition which, in my judg- 
 ment, no state should tolerate, let alone, create. 
 
 Premium on Fires 
 
 No state desirous of lessening the destruction of property 
 by fire should place or permit to remain on its statute books 
 a law which puts a premium on the destruction of property. 
 Such a law would be bad enough if it were certain that a 
 
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fire would be confined to the property on which it originates, 
 but in the light of the possibility, not to say the probability, 
 of its spread to the property of others and the consequent 
 destruction of human life, it becomes an enormity that should 
 not be permitted to exist. 
 
 Eliminating all considerations of the tendency to encour- 
 age crime with its attendant destruction of life and property 
 which such a law embodies, and viewing the matter from a 
 cold commercial standpoint only, it seems to me that there 
 can be but one conclusion as to the value of an enactment 
 of this nature. The experience of every state having such a 
 law, so far as I have been able to learn, is that premium rates 
 have advanced in its wake. This is the logic of the situation. 
 Human nature is such that no state can, by legislation, make 
 it an object for its citizens to permit their insured property 
 to be destroyed by fire and escape the development of prop- 
 erty owners who will take advantage of the opportunity af- 
 forded to make their property earn them a profit. This 
 result will follow as surely as night follows day. Then, too, 
 with the opportunity to collect in the name of the law greater 
 values than those destroyed by fire, what incentive is there 
 for the property owner to exercise watchfulness and care 
 in guarding his property from fire? Such enactments in- 
 volve the state in a two-fold loss. They result in the greater 
 destruction of property which should be preserved in the 
 interest of the state and in increased exactions from its peo- 
 ple in the shape of higher premium rates. From every 
 standpoint the valued policy law, so-called, is, in my judg- 
 ment, a delusion, a snare and a menace to those in whose 
 fancied interest it is enacted. Every consideration of justice 
 and economy condemns it. 
 
 I am aware that it is contended by the advocates of this 
 law that the insured should receive all the insurance he pays 
 for, but it should be remembered that it takes two to make a 
 contract and each party should be held to strict honesty in 
 its execution. It is a monstrous doctrine that a person who 
 deliberately misrepresents the value of his property and 
 thereby succeeds in over insuring it should be permitted to 
 
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materially profit by his wrongdoing in this respect, even 
 though the transaction be not further characterized by delib- 
 erate crime in connection with the destruction of the prop- 
 erty. 
 
 Practical Question 
 
 This is a practical question which should be treated by 
 legislatures from a practical standpoint. It is patent that 
 from the very nature of the business and the necessary hand- 
 ling of it through the agency system, it is impossible for 
 companies to be everywhere represented by experts in values 
 of every name and nature. If a company should be fortu- 
 nate enough to be represented in this city by a man thor- 
 oughly familiar with building values, it would hardly follow 
 that such agent would be capable of accurately estimating 
 the value of stocks of goods and thus protect his company 
 from over insuring the various classes of property on which 
 insurance is offered. 
 
 The valued policy law places a premium on dishonesty 
 and disaster. A legislature should be the last to lead the 
 citizens of a state into temptation. 
 
 But ignoring the moral question involved, it is worse than 
 folly, it seems to me, for a state to encourage a system 
 which experience has conclusively shown results in the in- 
 creased destruction of property which should, in the inter- 
 ests of the people, be preserved, and the increased cost of 
 insurance. 
 
 Rather than make it possible for its citizens to profit by 
 the destruction of their property by fire, it were far better 
 for the state, through legislative enactment, to require such 
 citizens to carry a percentage of their own risk. This would 
 insure the exercise of greater care and precaution against 
 fire, and necessarily tend to materially reduce the destruction 
 of property. Insurance can mitigate the loss of the individ- 
 ual, but it cannot reutrn to the nation’s wealth what fire has 
 destroyed 
 
 The state should address itself to the treatment of this 
 great question of fire waste just as it would to any other 
 
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menace which threatens the people. It should gladly co- 
 operate with every agency which in any wise seeks to prevent 
 fires and decrease the alarming proportions of the country's 
 annual ash heap. It should be as active in its efforts to 
 stamp out this great agency of destruction of the lives and 
 property of the people as it is in preventing the spread of an 
 epidemic of disease which demands its toll of human lives 
 alone. 
 
 In whatever effort the state may make, through legisla- 
 tion or otherwise, to control this great and costly evil, it 
 should recognize in the fire insurance companies which 
 supply the commodity so absolutely essential to the business 
 of every community its most potent friends and allies. It 
 should recognize this fact in dealing with its own citizens, 
 for it is they in the last analysis who pay all the freight. 
 This is a fact which is too often lost sight of by legislators 
 who fancy that they are treating with some far away hostile 
 interest which can be handicapped and burdened in its 
 operations to the benefit rather than to the positive detri- 
 ment of the people of their own state. Legislators should 
 understand that whenever they unduly burden or unjustly 
 harass a company they are simply placing a burden upon 
 those of their own constituents who are obliged to purchase 
 fire insurance. There is no one else to carry the burden or 
 pay the tribute. 
 
 Instead of being handicapped by unwise legislation, these 
 companies should be encouraged in every legitimate under- 
 taking. In all that they do to lessen the hazard, improve 
 conditions and educate the public to an appreciation of its 
 duty to do everything in its power to reduce the enormous 
 fire waste which now constitutes such a drain on the re- 
 sources of the country, they should have the encourage- 
 ment and enthusiastic co-operation of all right minded citi- 
 zens and of all law making bodies, national, state and mu- 
 nicipal. 
 
 Fire insurance companies, through their perhaps selfish 
 efforts to decrease the fire waste, have been the most potent 
 factor in such improvements as have been made by methods 
 
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of construction and fire protection, and new efforts in this 
 direction are constantly being put forth by them. In this 
 work they are entitled to and should receive the heartiest 
 co-operation of the public, lawmakers and supervising offi- 
 cials. Every accomplishment in this line will inevitably re- 
 duce the cost of the indemnity they have for sale, to the 
 mutual benefit of the companies and the insuring public. 
 In so far as co-operation on the part of the companies tends 
 to enable them to better instruct the insuring public as to 
 existing dangers and the best methods of reducing them to 
 the minimum and to minimize the expense of making ne- 
 cessary inspections, surveys, experiments, etc., which are 
 so essential to the proper and economical conduct of the 
 business, the state should interpose no obstacle, but should 
 give the work its full and complete sanction. Every dollar 
 well spent in this connection means a saving to the state of 
 its material resources and a further saving to every citizen 
 of the state who is a purchaser of fire insurance contracts. It 
 is far less expensive from the standpoint of the policy-holder 
 to have all the companies contribute to the expense of con- 
 ducting the various branches of this work than it is to 
 compel, through unwise legislation, each company to carry 
 it on at its own expense, thus making it not only a greater 
 financial burden, but at the same time less perfect in its re- 
 sults, because of each company being dependent on its own 
 experience rather than on the combined experience of all 
 companies in the field. No careful, intelligent business man 
 will purchase the contract of any company which does not 
 give careful attention to these essential details of the busi- 
 ness, for such a company is simply plunging about in the 
 underwriting sea without chart or compass and is sure to 
 be, sooner or later, stranded on the rocks which constantly 
 menace it. 
 
 Should Foster Co-Operation 
 
 In order to foster and encourage co-operation for the 
 legitimate purposes outlined above, it is not necessary for 
 the state to countenance combinations in restraint of trade 
 
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or any compact which has for its purpose the fixing or 
 maintenance of rates of premium. In what I have said I 
 have had in mind only such legitimate undertakings of the 
 company as can best be conducted through united action 
 and which tend, through the better classification, construc- 
 tion, inspection and improvement of risks and the deter- 
 mination by experts of the proper charges to be made for 
 defects and the proper credits to be allowed for improve- 
 ments to reduce the fire waste and consequently the cost 
 of insurance. It is inevitable that the rates of premium 
 will decrease with the decrease in the number and extent of 
 fires and the expense of conducting the business. The 
 gainers from this will be that portion of the public which 
 purchases fire insurance, just as that portion is called upon 
 to pay the cost of every burden and unwise exaction placed 
 upon the business. 
 
 The paramount obligation of the state in connection with 
 fire insurance is to see to it that the public is supplied with 
 sound indemnity. It is far more essential that the state 
 exercise its authority to the end that the companies author- 
 ized to transact business within its borders are possessed 
 at all times of sufficient funds to enable them to pay their 
 losses, whether these losses are normal or those precipitated 
 by a great conflagration, than to undertake, through a mis- 
 taken sense of its obligation to its citizens, to force a tem- 
 porary reduction of rates at the expense of the solvency 
 of these companies. The company that fails to collect an 
 adequate rate is a far greater menace to the public than the 
 one which shows, what to the unthinking mind, is an ab- 
 normal surplus. The one proves to be a broken reed in 
 time of stress, while the other is ever a staff which furnishes 
 unfailing support in time of greatest need. 
 
 This is a principle thoroughly established and enforced by 
 law in life insurance where the valuation statutes fix a 
 minimum rate below which no company can go and main- 
 tain the required reserve. The state and the law should as 
 thoroughly safeguard citizens who purchase fire insurance. 
 
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