After reviewing the cases, the learned Attorney General, Isaac L. Straus, concludes as follows:

"The sound and true doctrine of the law upon the subject, in my judgment, is that combination or agreement between insurance underwriters and their representatives relating to insurance are ordinarily valid at common law unless they are unreasonable, or, what is the same thing, injuriously, in restraint of trade.

"This principle, which I hold to be controlling in the present case, is supported by the following authorities:

"Continental Ins. Co. v. Fire Underwriters, 67 Fed. Rep., 310; "Workman v. London, etc., Ins. Co., 19 Times L. R. 369;

“People ex rel. Pickney v. New York Fire Under., 7 Hun., 248;

"Childs v. Firemen's Ins. Co., 66 Minn., 393;

"Bloom. v. Home Ins. Agency, 91 Ark., 367;

"Louisville Board of Fire Und. v. Johnson, 133 Ky., 646;

"Queen Ins. Co. v. State, 86 Tex., 250;

"State v. Bovee, 6 Ohio, N. P. N. S., 337.”

FIRE LOSS AND PREVENTION.

The actual fire losses due to the destruction of buildings and their contents in 1900 amounted to $160,928,805.00; in 1904, to $209,198,050.00; in 1906, the year of the San Francisco fire, to $518,611,800.00, and in 1910, to $214,003,300.00.

It has been stated by authority, believed to be competent, that the total fire cost in this country is many times as much per capita as in any country of Europe. The average annual per capita loss of the American citizen by reason of fire waste is over $2.00. The annual per capita loss in Europe is $0.33. It has been estimated that the stock companies of the United States actually expend $6,000,000.00 per year for fire prevention purposes. During 1912, the fire insurance companies received premiums amounting to approximately $290,000,000.00 and over 24 per cent was expended for fire prevention. The expenses of the companies during the same year were approximately $120,000,000.00 of which 5 per cent was expended for fire prevention.

The attitude of the insurance companies toward fire prevention has changed in recent years in that there seems to be a more liberal spirit among the underwriters. The organized bodies representing companies and agents have been foremost in the promotion of devices for the prevention and extinction of fires but it has been stated that these organizations are not accomplishing what they should. They certainly have not in the past given credit, in the proper degree, for improvements which lessen the hazard. It is safe to say that some few managers are more interested in collecting premiums, declaring dividends and receiving salaries than they are in the welfare of the community at large, but your commission believes that this is not the attitude of the average manager. The agitation for reducing the fire waste is productive of results as shown by the fact that whereas the property of the United States is increasing very rapidly in value, there is no corresponding increase from year to year in the fire loss. Hence on the basis of percentage the fire waste is being gradually lessened.

Will the insured get a reduction in premium rates corresponding to the reduction in hazards? At present the companies or the agents fix the rates and the insured does not have the slightest voice in the matter unless he be a person of influence. A supervision or regulation of rates by the State, would force the sellers of insurance, in the event of a material reduction in the fire waste, to reduce rates.

It has been said that "as growth of premium can only come through growth of losses by fire, the partnership between fire waste and fire insurance is logically established." A vice president of one of the New England companies in a lecture delivered by him at Yale remarked, "theoretically insurance companies pure and simple, have nothing to do with the reduction of fire waste. Their province is merely to distribute the loss which fire costs." The vice president of a Connecticut company testified before the Illinois Fire Commission: "As a business, fire insurance is conducted by companies

with most satisfaction and with larger profits in the years when fires are plenty; a good number of fires means a good premium account, and speaking for my company, for the insurance companies, I should say that a reduction of the fire waste would not be a profitable thing." We do not quote these gentlemen as favoring fire waste, that is not their meaning. Nevertheless, indifference, was their attitude.

Better construction of buildings, improved fire-fighting equipment, popular fire education with regard to the causes and dangers of fire and of simple and practical means of fire prevention are necessary in every state in the Union to reduce the frightful fire waste of the present day. The fire waste in this country amounts to over $250,000,000.00 a year. The fire insurance premiums paid during the year 1913 in the United States amount to the sum of $385,367,544.00. Not all of the fire loss is insured but fire losses paid in the State of Illinois by stock companies alone, and this is approximately 94 per cent, of all the fire insurance written in the State, amounted to $14,876,860.00 in the year 1913. Fire prevention will certainly reduce high rates. Cheap insurance will never become a fact, no matter how or by whom written, until fire waste in this country is materially reduced. Up to the present time the people have either neglected or failed to meet the insurance interests half way in the great campaign of fire prevention.

At Baltimore and San Francisco the conflagration easily attacked buildings built of brick and stone because their windows were of thin glass and their frames of wood. Panes of glass broke, the frames were consumed and every story of the buildings became flues filled with combustible material. Remedy-metal window frames, strong glass or wire glass and construction of the order which will anticipate the possibility of a great conflagration at some future date and thus having in view the protection of surrounding property as well as the building itself. The citizens of this country will some day realize that all large buildings in which many people are employed or housed will have to be constructed to a greater extend than now with noncombustible material. Many buildings are capable fire-stops provided the fire can be kept out of them. Having thus protected the buildings in close districts, fires in individual structures can be prevented by the use of automatic sprinkler systems. The abolition of the conflagration hazard, together with a reduction of the expense of procuring and writing risks, constitute the two campaigns, one by the people and the other by the companies, which must be successfully waged before any satisfactory and permanent fire insurance rate reduction can be accomplished.

The above relates to commercial and office buildings and the like. How about the districts surrounding such buildings, or more particularly speaking, the dwellings? The Indiana Fire Marshal stated in 1913 that "one of the greatest sources of fire in Indiana cities is the shingle roof. Shingles not only act as tinder to be kindled by sparks from locomotives and chimneys, but when ablaze they easily fly through the air and fire adjoining roofs." In the Fire Marshal's report it was set forth that from May 15 to September 27, 1913, in the state of Indiana, there was a total of five hundred sixty-seven (567) fires caused from sparks falling on shingled roofs. The loss resulting from these spark fires reached $657,179.

Many cities have adopted a non-combustible roofing which they are requiring property owners in certain districts to use. This precaution, together with care of construction and proper inspection of heating apparatus, including flues and chimneys, together with the use of a proper match will do much in solving the loss in this particular class of hazard.

It has been stated by one of the leading authorities on fire protection in the United States that the precaution in the matter of construction, inspection and care to a common sense degree only, would result in an almost immediate reduction of the fire waste by perhaps fifty per cent.

The committee on publicity and education of the Chicago Board of Underwriters in March, 1912, stated the following on the use of wooden shingles:

"The conflagration hazard will hang over every town and village so long as wooden shingles are used for roofs. * * * Insurance companies make their material reductions in rates for non-combustible roofs, and the old fashion slate and tin or gravel roof and the newer cement-shingle and tile

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roofs should be encouraged by every municipality. It would be better if all buildings were constructed of non-combustible material, but if the frames or walls must be of wood, the roof at least should be fireproof. The average man apparently believes that the present proportion of fires is inevitable, just as our forefathers believed that plagues and epidemics were inevitable. The latter were prevented because the people individually and collectively were finally induced to give heed to proper sanitary rules. The epidemic of fires could be reduced as easily if the people individually and collectively would give heed to proper rules for the construction, protection and care of their property."

Great saving would result from teaching fire causes and prevention in the public schools. Nebraska claims beneficial results have been obtained in that state. Ohio, New York, Iowa, Montana and other states have taken action in this direction. The courses suggested are: (a) causes of fires; (b) guarding against such causes; (c) how to extinguish or hold fires in check, and (d) fire department and the alarm system. Text books on the subject have been published. These courses, for the schools, should be placed under charge of the Fire Marshal's Department.

CLASSIFICATION OF EXPERIENCES.

At the National Convention of Insurance Commissioners of 1913, the Special Committee on the Classification of Fire Insurance Experience, consisting of the following commissioners, W. T. Emment, of New York; Herman L. Ekern, of Wisconsin; Burton Mansfield, of Connecticut, and James R. Young, of North Carolina (Fred W. Potter, of Illinois, was a member of this committee, but was ill at the time), reported that the "underwriters expressed their firm conviction that tables showing classification of experience could be of no practical value as a basis for establishing equitable rates." The report of this special committee shows that a special committee of the National Board of Fire Underwriters was in attendance and actively engaged in the discussion of the feasibility of a uniform system of classification. The committee of the commissioners was granted further time by the convention.

The conviction of the underwriters, above expressed, does not seem sound to this commission. There is no doubt that classified experience, plus keen insight and judgment, is better than experience alone in making fire insurance rates.

The combined experience of fire insurance companies, and other fire insurance organization and associations, if possible, should be gathered and published and this will have to be done before rates are charged equitably and properly according to the hazard. At any rate, the public and business generally is so convinced.

The attitude of some of the principal fire underwriters can be briefly stated as follows: "Classification statistics of premiums and losses have little or no practical value, except as profit and loss accounts, and are useless for rate making purposes."

In April, 1914, the above mentioned committee of the National Convention of Insurance Commissioners, and a special committee of the National Board of Fire Underwriters, met in Chicago to consider the question of the preparation of a standard form of classification of occupancy hazards and loss reports for the United States.

The proposal came from the National Board and the objects sought were: 1. A complete and carefully compiled record of all fire losses upon insured property in the United States, with information regarding location and character of property, values, insurance, origin of fires, etc., thus enabling the board to report to such states as may require a complete list, year by year, of the losses occurring therein, with correlative facts.

2. For the investigation of the fire dangers to which each class of property is subject, and the development of thorough and scientific information concerning the causes of fire and their prevention.

3. For a complete record of claimants.

It was proposed that a Loss Bureau of the National Board of Fire Underwriters be established. This department, it was expected, would become a

real factor in reducing the fire waste of the country as well as a co-worker with the Committee on Construction of Buildings, the Committee on Fire Prevention and other committees established by the board.

The board requested the insurance superintendents of the different states to assure it that an annual report of losses, and all information regarding same, of board companies, by this Loss Bureau, after it had become established and efficient, to each state, in lieu of present burdensome and varying requirements made of the companies for loss reports, would be accepted. This was reasonable. This was reasonable. Uniformity was desirable. Economy and efficiency and classified general statistics were sought. It was suggested, the magnitude of the task, which the board sought to impose upon itself, might be understood by considering the fact that one insurance company entered on its loss books during the first three months of 1914 over 6,000 losses in the United States. The plan involved immediate notice, to the state official by the board, of the report of any fires which might be classified as suspicious. This would in no way interfere with reports which should be promptly made by the companies to the state supervising official, regarding suspicious fires and other matters.

The requirements of the different states greatly vary as to form and details of loss reports. The national board plan of uniformity [,] and proper, but exacting, detail will furnish statistics of same character so that the losses, and classification thereof, of approximately ninety per cent of the fire insurance business of this country will be obtainable.

The plan involves the obligation on the part of each company or agency to report to the Loss Bureau, as early as possible after adjustment of loss, the following facts, and spaced cards are used for the purpose:

Name of Company, Claim Number, and Number of Companies Interested. State, Town, Address and Floor of Building Where Loss Occurred. Building and Occupancy Description.

Character of Construction of Building, such as Brick, Frame, Unprotected, Protected, etc.

Amount of Insurance on Building and Contents and Losses Paid by Company Reporting.

Date of Fire-Total Insurance on Risk.

Sound Value of Adjustment-Value of Property Destroyed-Origin of Fire, Whether on Premises and From Internal or External Exposure.

What the National Board desires to accomplish, and the means necessary to that end, is in the words of one of the members of the Actuarial Committee of that board, "a bureau for investigation, classification and record of fires, causes and claimants, which would be of equal importance to the insurance company and the State". Cooperation of state officials is essential to the success of such a bureau. With such cooperation the cause of fire prevention will be advanced. However, the most important element in this great effort, as it appears to this commission, is that it is an essential factor in the development of a rate-making system based upon actual and systematically classified experience, which system, your commission believes, will ultimately be perfected and adopted to the satisfaction of all concerned.

The classification list of occupancy hazards includes some nine hundred fifty-eight classes under the headings of non-hazardous, mercantile, manufacturing specials, non-manufacturing specials, miscellaneous and automatic sprinklered risks. Most companies have already discarded their old classifications.

These loss reports are coming in, your commission is informed, at the rate of from twenty-five hundred to three thousand a day. All reports are carefully examined and if any found apparently incorrect or incomplete a request is immediately made for corrected or complete information. An alphabetical list of the owners of all risks suffering loss is kept and this enables the bureau to ascertain the record of the insured. The system is so arranged with electric tabulators, sorters and calculators. that the losses on any particular class, in a given city, can be ascertained in a few moments. The total expense of this undertaking during the five years commencing January 1, 1915, it is estimated, will amount to one million dollars.

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This Standard Classification and Loss Report Form was adopted on October 29, 1914, and took effect January 1, 1915. Prior to this time the

Fire Marshal's Association of North America and National Convention of Insurance Commissioners recommended, by resolutions, the adoption of said Classification and Loss Report Form and pledged support to the undertaking.

RATING METHODS.

Insurance companies use two methods of rating. Originally risks were grouped into a few classes to which flat rates were assigned, each risk in a class taking the same rate regardless of distinctions of hazard. Gradually distinctions of hazard became recognized by charges for elements that increased the probable damage and by credits for those that reduced it. This practice resulted in a device for applying the charges and credits called a schedule. The schedule consists of a basis charge or rate followed by a list of charges and credits assigned to certain distinctions of hazard. The presence of these distinctions in any given risk is determined by a survey and the net result of the appropriate charges and credits is the insurance rate of the risk. The effect of the schedule is to distribute the average charge appropriate for a group of risks so that those of a poor character shall pay a higher rate and those of a good character a lower rate. Flat rates still are used for dwellings and for small stores in outlying portions of large cities, and such classes are listed under a Minimum Tariff. All other risks are variously grouped and rated under the more modern schedule. The tendency is constantly to withdraw risks from the Minimum Tariff and place them under some form of schedule.

There is a lack of uniformity in flat rates and schedules throughout the country. In, the East and South the schedules are patterned after the Universal Mercantile Schedule, of which the late Mr. F. M. Moore was the author, while in the West the Analytic Schedule, devised by Mr. A. F. Dean, is used. Experts in the two sections are more or less partisan in behalf of these two forms of schedule, but practically either can be used with equal facility to obtain the level of rates desired by rating organizations. Both are alike in rewarding the good features of the town and risk, and in penalizing the bad. The chief differences between the two are: the forms of making the charges and credits and the use of numerous basis tables by the Dean. In the Universal, the charges and credits are expressed in cents on the one hundred dollars, but in the Dean they are percentages of the basis rate. The rates in the Dean vary according to the basis table selected; those found under the 80 table are one-third higher than those found under the 60 table, and those under the 120 double those under the 60. While your commission believes that either type of schedule can be amended and applied so that substantial justice shall be administered, the Dean schedule is the more susceptible of manipulation owing to the custom of concealing the basis tables used in the several states or in sections and cities of the same state.

A third form of rating is employed in the Factory Mutual System developed by Eastern manufacturers. A risk is surveyed and improvements are ordered to bring it up to an established standard of protection against fire. It is then placed in one of several classes, according to the judgment of the rater to which flat rates are given of fifty cents, seventy-five cents, etc. These flat rate groups share alike in a percentage return of premiums based on the losses for the year, and the returns are so large that insurance in the lowest rated group sometimes falls as low as two cents on the one hundred dollars.

Certain special insurance activities competing with organized stock companies have no rating system of their own, but use the rates promulgated by rating bureaus as a basis and offer either, in advance, a percentage reduction or a return dividend based on the experience of the year.

RATE MAKING.

Schedules and minimum tariffs are made primarily by some form of insurance organization or association and are applied by experts in their employ. No single rate making body controls rates throughout Illinois. Rates for Chicago and Cook County are made and published by the Chicago Board of Underwriters. Rates for the State outside of Cook County are