MORAL HAZARD IN FIRE INSURANCE

Dominion, Volume 5, Issue 1447, 23 May 1912, Page 6

MORAL HAZARD IN FIRE INSURANCE

, a IS IT DETERIORATING? tn the course of a paper road Wore the Insurance Institute of Wellington'on Tuesday evening by tho president (Mr. 11. .1. White), he said:—"Fire companies harp, not boon disturbed by any groat conflagrations such as frequently thrill the world with their horror and loss. At the same time, it is becoming nioro patent to students of fire insurance matters that tho progress of the world is not maintaining its fight against tho elemont of fire, and in realising that this is the caso firo underwriters have had to exercise their every wit to devise regulations for tho prevention and spread of fire. So far as they arc concerned ill this work, (heir efforts can only lio in the direction of improving physical hazards. These hazards do not influence greatly wh.it is known as 'moral hazard,' and 1 think I. express the- genr-ra! belief when I say Hint the mora! hazard is n far more serious consideration for fire underwriters than the physical one. Given an ortually good moral hazard in the cases of good and bad physical risks, fair rates can be scientifically arrived at for iioth, but. introduce an undesirable moral risk and no calculations of rates can avail. Is Hie 'moral hazard' in firo risks deteriorating? I think it is. 'Every day in the year there are close to thirty fires in Greater New York. At least fifteen of these,' says a' recent writer, 'are due to carelessness, caused by somebody disregarding the firo peril in a way that should bo reckoned a crime.' Yes, someone says, that may happen in New York, but not in Xew Zealand. I could hope not, but it must be remembered that Xciv Zealand's record for live waste per capita per annum has for maniy years, been the worst ill Iho world."