Two other main features marked the develop ment of the fire insurance business during this second period, viz., the development of the mutual idea, and the employment of special agents. The great majority of New York companies having been wiped out by the New York con flagration, it was only natural, as a result of great distrust against stock companies, that one of the so-called °mutual waves, ° to which the fire insurance business has been subject from time to time, should sweep over the country. The extent of the movement may be inferred from the fact that no fewer than 62 of these concerns reported to the comptroller of New York by 1853. Most of these concerns, how ever, were organized on incorrect principles, and operated over too large an area and upon too small a capital to assure the safeguards necessary to mutual insurance, with the result that the whole idea soon proved unsatisfactory and became highly discredited. The stock com panies, on the other hand, took advantage of the opening of the West, and began to spread their business beyond their immediate home localities. Such a movement naturally required greater dependence upon field representatives; hence we find the companies employing special agents, or field men. But the function of these representatives, unlike the later practice, was still limited mainly to the adjustment of losses.
With the close of the Civil War the business entered, for the first time, into a period of co-operation. In 1866 the leading companies of the country organized the National Board of Fire Underwriters for the purpose of se curing adequate rates and uniformity in the use of proper forms and the handling of all matters of common interest. This event prob ably marked the most important change that had thus far occurred in a business so essen tially co-operative in character. Other events during this period, however, also serve to show the increasing tendency to place the business on a scientific foundation. Thus the daily report system came into general use in place of the so-called monthly statement. Local representa tives were thus entrusted with much greater responsibility, since they were required in the preparation of their daily reports to pass upon the business accepted by the home offices. As a consequence a better class of men was needed in the field. It therefore followed, in turn, that the functions of special agents, formerly limited to the adjustment of losses, were now greatly enlarged and extended to the appoint ment of new agents, the examination of im portant risks, and the supervision of agency accounts and methods. Incompleteness in the information of risks as furnished by the field men in their daily reports also led to the use of fire maps, a feature to be later universally adopted by companies for all the larger towns and cities.
Unfortunately, the spirit of co-operation, referred to above, was rudely checked by the great Chicago and Boston fires. So many companies were destroyed by these conflagrations and so many others weakened financially that the business of fire insurance was forced into a period of utmost demoraliza tion, especially from 1874 to 1880. Not onl
were numerous irresponsible companies forme but to aggravate the situation the Nations Board of Fire Underwriters discontinued the making of rates in 1877 and relegated this all important function back to the local boards. Competition in rates now became the order of the day, with the result that adequate rates could no longer be maintained. With cut-throat competition holding supreme, profits soon dis appeared for most companies and only the fittest found it possible to survive. Such dis integration of the fire insurance business, so inherently co-operatiVe in character, could not long continue, and with the beginning of 1:4:1 (this date marking the start of our last epoch) we witness a renewed effort at co operation. Thus in rapid succession we had the organization of the Western Union in 1879, the Underwriters Association of the Middle Department in 1881, the Southeastern Tariff Association and the Illinois State Board of Fire Underwriters in 1882, and the Underwriters' Association of New York State and the New England Insurance Exchange in 1883. Upon these and numerous other associations fell the important work of rate-making, of readjusting the numerous local boards, of applying scien tific principles to the business, of unifying forms and practices, and of inculcating educa tion along insurance and fire prevention meth ods. Space limits make impossible a discussion of all the important changes that have occurred in the fire insurance business during the last few decades. The following changes, however, constitute so vital a place in the fire insurance business of to-day that somewhat more than passing mention is justified. Briefly described, they are: (1) The Adoption of a Standard Policy. — When all companies used their own policy forms, sometimes designed purposely to limit their liability, there was bound to be much doubt and litigation. The advantages of a carefully worded contract, mandatory upon all companies, are so apparent that one wonders why the matter was delayed until 1873 when Massachusetts provided a standard contract and later, in 1880, made it obligatory upon all coin panies doing business in the State. In 1886 New York adopted a standard contract (made mandatory in January 1887) which subse quently became the law, with slight changes here and there, in numerous other States. Recently the original New York contract has been revised in New York and various other leading States, and at present it may be said that a standard contract is in general use throughout the country. Since certain States require the use of a standard by all companies, it follows that these companies find it con venient to use the same contract elsewhere although no statute may prescribe a standard. Through the operation of underwriters' asso ciations a remarkable uniformity has also been developed in the use of standard clauses and riders.