7. Insurable interest.—In the early days of the busines‘a spirit of gambling, which perhaps was born. with it, grew strong. This was not checked until a law was passed decreeing that policies could not be taken' out except by those who had an insurable in terest in the property. If one wonders that anything else ever could have been the case, it must be remem bered that insurance was looked upon as such a vision ary project in those days that it was considered•much the same as gambling—that is, the risk, or the hazard, in the business was considered in much the same way. The English statute on the subject, which is the basis of all others was that of 14 Geo. III. C. 48. In its recital of the evils arising from gambling contracts it is similar to the statute of 19 Geo. II., applicable to marine insurance, to which reference was made in the preceding chapter ( Section 7). The statute of 14 Geo. III. parallels the earlier one, except that it re quires an insurable interest in the life or events upon which the policy is taken out, and does not refer to marine insurance at all.
8. Insurable interest appears in many forms.— When there is absolute ownership of the property, with no other interest involved, there is no question as to who possesses an insurance interest. The prop erty may be mortgaged and yet the owner may still have a complete insurable interest in it. The mort gage also possesses an insurable interest. It is only necessary that one have some financial interest in the property. It may be very slight, as a contract for the purchase of the piece of property.
Insurable interest also arises from one's legal rela tion to, or obligation on account of, the property. The administrator of an estate is charged with the proper care of the property. One of his duties is to safeguard it from loss by fire. If he should fail to take out insurance, and the property should burn and the heirs sustain a loss, he could-be held in damages for neglect, and since he can be so held he acquires an insurable interest.
9. Insurance are four different types of companies that conduct the insurance busi ness today: (a) The stock companies, which do 95 per cent of the business.
(b) The mutuals. These may be divided into two classes : The first, the small local mutuals which may operate to advantage with a limited line of risks and in a limited territory. They have not succeeded where they have branched out to any great extent. Second, the mill mutuals, as they are called, which specialize in large manufacturing plants. They have
had a most successful career. They are primarily organizations for fire prevention, and deal largely with sprinkler risks. These companies have attained a high standard in the work of fire prevention.
(c) Reciprocal underwriters. Insurance business is sometimes carried on by a group 'of individuals who agree to insure one another. The work is conducted by one person who is appointed as attorney and who transacts the business for the underwriters. He is paid a certain percentage, and out of this he pays the expenses.
(d) Lloyd's. A somewhat freer form of individ ual business called "Lloyd's" has almost entirely passed away. It is still possible in some parts of the United States for groups of individuals to undertake the business of fire insurance if they do it within cer tain limits. Many of these organizations spring up, and take the name of Lloyd's because the name is synonymous with insurance: 10. Extent of capital of the stock companies in the United States amounts now to about eighty million dollars. The foreign companies— whose home offices or places of incorporation are in some other country—treat the business done in the United States merely as a part of their total business. In a sense, they have no actual capital, so far as this country is concerned, altho at the present time it is considered that they should have in this country not less than the minimum capital required of an Ameri can company. As a matter of fact, they have many times that. But in speaking of capital the foreign companies are not considered.
The number of companies engaged in the business is 175. The amount of business written, that is, the risks for which policies are issued, amounts to forty billions of dollars. The premiums received in the United States represent three hundred and twenty five million dollars; the losses thru a series of years will average about 55 per cent of the premiums received. Of the remaining 45 per cent the acquisition cost, which covers many services performed by the broker and his commissions, is about 22 per cent. The other expenses of the company will eat up 18 per cent, leaving thru a series of years only about 5 per cent as an underwriting profit. The average rate of premium is now $1.04. This is slightly over 1 per cent for each $100 of business written. The dividends will average for all the companies about 10 per cent. There is, of course, the greatest variation in the dividends, as in other corporations, but this is a fair average.