Financial Aspect Of Fire Insurance Protection
( Originally Published 1911 )
Financial phase.—The financial phase of the problem of fire protection is not unworthy of considerable attention. The whole problem of fire protection is closely allied to the problem of fire insurance ; and it is problematic whether either has benefited by the union or whether its development has been as great as it would have been had the close connection not been maintained. The fact remains, however, that when the owner of a considerable property undertakes improvements, having in view a lessening of the fire hazard, he at once considers how much he can save on the rate of insurance. This view of the matter is wrong in that it tends to limit fire prevention to properties sufficiently valuable to pay the cost of prevention at a reduced rate of insurance.
Illustration.—For instance, the owners of property carrying insurance of one million dollars, found that by introducing sprinklers the saving in the rate would be sufficient in three years to reimburse them for the actual cost of the equipment. Thus, in the course of time the equipment becomes the property of the owners through a saving in the rate.
It can readily be seen that as a fire hazard a property which may only want insurance of 25,000, may be as bad as one carrying one million dollars of insurance, but the saving in the insurance would not be sufficient to pay for a sprinkler equipment.
Relation between cost and saving. Fire pails are the cheapest form of fire prevention. They can be placed in a building at so low a cost that the saving in the premium on the smallest amount of insurance is generally sufficient to pay for the installation.
Between these two extremes—the fire pail and the sprinkler—come various other devices, of intermediate cost, such as signaling systems, chemical extinguishers, etc. Experience shows in nearly all cases that in order to secure their installation the saving in the rate of insurance must be sufficient to reimburse the insured for the expense. In other words, the insured entertains the idea that the cost of a fire prevention device should be equaled by a saving in the rate. This attitude has limited the work of fire prevention to a large degree. It is equally true when the insured is asked to consider the re-arranging or changing of his plant; as dividing it into smaller units, placing fire doors at communications, cutting off the more hazardous from the less hazardous, or the manufacturing from the storage. It generally comes back to the question of "How much will I save on my rate of insurance?"
Engineer's recommendations.—The fire protection engineer is like all engineers in civil life. He must consider the relation between the cost of his recommendations and the gain to his client. He may suggest that the mere limitation of the chances of fire should be sufficient to the insured to induce him to install a protecting device, but when the engineer also offers a reduction in the rate sufficient to cover the cost of the improvement the argument becomes additionally at-tractive.
The pocket nerve has been defined as the most sensitive nerve in the human body. This is especially true in the work of fire prevention, for when the increased charge touches the pocket the insured is ever found more amenable to the consideration of installing fire prevention devices.
The supposition that fire prevention and the reduction in fire loss in the United States and elsewhere are dependent upon the fire protection engineer is not altogether true. On the contrary, such ordinary faults as the failure to take care of waste, rubbish, etc., are responsible for more than one-half of the fire losses in the United States. An improvement in the house-keeping of the business-house porter is all that is necessary to reduce the fire loss by 50 per cent.