In the monumental work of Professor Golunk-Dorsto (“Some Account of the Insurance Delusion in Ancient America”) we have its most considerable modern exposition; and Gakler’s well-known volume, “The Follies of Antiquity,” contains much interesting matter relating to it. From these and other sources the student of human unreason can reconstruct that astounding fallacy of insurance as, from three joints of its tail, the great naturalist Bogramus restored the ancient elephant, from hoof to horn.
The game of insurance, as practiced by the ancient Americans (and, as Gakler conjectures, by some of the tribesmen of Europe), was gambling, pure and simple, despite the sentimental character that its proponents sought to impress upon some forms of it for the greater prosperity of their dealings with its dupes. Essentially, it was a bet between the insurer and the insured. The number of ways in which the wager was made—all devised by the insurer—was almost infinite, but in none of them was there a departure from the intrinsic nature of the transaction as seen in its simplest, frankest form, which we shall here expound.
To those unlearned in the economical institutions of antiquity it is necessary to explain that in ancient America, long prior to the disastrous Japanese war, individual ownership of property was unrestricted; every person was permitted to get as much as he was able, and to hold it as his own without regard to his needs, or whether he made any good use of it or not. By some plan of distribution not now understood even the habitable surface of the earth, with the minerals beneath, was parceled out among the favored few, and there was really no place except at sea where children of the others could lawfully be born. Upon a part of the dry land that he had been able to acquire, or had leased from another for the purpose, a man would build a house worth, say, ten thousand drusoes.
(The ancient unit of value was the “dollar,” but nothing is now known as to its actual worth.) Long before the building was complete the owner was beset by “touts” and “cappers” of the insurance game, who poured into his ears the most ingenious expositions of the advantages of betting that it would burn down—for with incredible fatuity the people of that time continued, generation after generation, to build inflammable habitations.
The persons whom the capper represented—they called themselves an “insurance company”—stood ready to accept the bet, a fact which seems to have generated no suspicion in the mind of the house-owner. Theoretically, of course, if the house did burn payment of the wager would partly or wholly recoup the winner of the bet for the loss of his house, but in fact the result of the transaction was commonly very different. For the privilege of betting that his property would be destroyed by fire the owner had to pay to the gentleman betting that it would not be, a certain percentage of its value every year, called a “premium.” The amount of this was determined by the company, which employed statisticians and actuaries to fix it at such a sum that, according to the law of probabilities, long before the house was “due to burn,” the company would have received more than the value of it in premiums. In other words, the owner of the house would himself supply the money to pay his bet, and a good deal more.
But how, it may be asked, could the company’s actuary know that the man’s house would last until he had paid in more than its insured value in premiums—more, that is to say, than the company would have to pay back?
He could not, but from his statistics he could know how many houses in ten thousand of that kind burned in their first year, how many in their second, their third, and so on. That was all that he needed to know, the house-owners knowing nothing about it. He fixed his rates according to the facts, and the occasional loss of a bet in an individual instance did not affect the certainty of a general winning. Like other professional gamblers, the company expected to lose sometimes, yet knew that in the long run it must win; which meant that in any special case it would probably win. With a thousand gambling games open to him in which the chances were equal, the infatuated dupe chose to “sit into” one where they were against him! Deceived by the cappers’ fairy tales, dazed by the complex and incomprehensible “calculations” put forth for his undoing, and having ever in the ear of his imagination the crackle and roar of the impoverishing flames, he grasped at the hope of beating—in an unwelcome way, it is true—“the man that kept the table.” He must have known for a certainty that if the company could afford to insure him he could not afford to let it. He must have known that the whole body of the insured paid to the insurers more than the insurers paid to them; otherwise the business could not have been conducted. This they cheerfully admitted; indeed, they proudly affirmed it. In fact, insurance companies were the only professional gamblers that had the incredible hardihood to parade their enormous winnings as an inducement to play against their game. These winnings (“assets,” they called them) proved their ability, they said, to pay when they lost; and that was indubitably true. What they did not prove, unfortunately, was the will to pay, which from the imperfect court records of the period that have come down to us, appears frequently to have been lacking. Gakler relates that in the instance of the city of San Francisco (somewhat doubtfully identified by Macronus as the modern fishing-village of Gharoo) the disinclination of the insurance companies to pay their bets had the most momentous consequences.
In the year 1906 San Francisco was totally destroyed by fire. The conflagration was caused by the friction of a pig scratching itself against an angle of a wooden building. More than one hundred thousand persons perished, and the loss of property is estimated by Kobo-Dogarque at one and a half million drusoes. On more than two-thirds of this enormous sum the insurance companies had laid bets, and the greater part of it they refused to pay. In justification they pointed out that the deed performed by the pig was “an act of God,” who in the analogous instance of the express companies had been specifically forbidden to take any action affecting the interests of parties to a contract, or the result of an agreed undertaking.
In the ensuing litigation their attorneys cited two notable precedents. A few years before the San Francisco disaster, another American city had experienced a similar one through the upsetting of a lamp by the kick of a cow. In that case, also, the insurance companies had successfully denied their liability on the ground that the cow, manifestly incited by some supernatural power, had unlawfully influenced the result of a wager to which she was not a party. The companies defendant had contended that the recourse of the property-owners was against, not them, but the owner of the cow. In his decision sustaining that view and dismissing the case, a learned judge (afterward president of one of the defendant companies) had in the legal phraseology of the period pronounced the action of the cow an obvious and flagrant instance of unwarrantable intervention. Kobo-Dogarque believes that this decision was afterward reversed by an appellate court of contrary political complexion and the companies were compelled to compromise, but of this there is no record. It is certain that in the San Francisco case the precedent was urged.
Another precedent which the companies cited with particular emphasis related to an unfortunate occurrence at a famous millionaires’ club in London, the capital of the renowned king, John Bui. A gentleman passing in the street fell in a fit and was carried into the club in convulsions. Two members promptly made a bet upon his life. A physician who chanced to be present set to work upon the patient, when one of the members who had laid the wager came forward and restrained him, saying: “Sir, I beg that you will attend to your own business. I have my money on that fit.”