Problem of the rate. When fire insurance was first established rate-making must have been largely guesswork. Barbon, who was apparently successful in his insurance adventure, either by good fortune or some clue to the problem of which we do not know, evidently made a rate that secured business and at the same time furnished sufficient funds to conduct it. The offices that were founded somewhat later than Barbon’s, have handed down to us copies of the tables showing the rates they charged, but no information as to the data on which they were based. In the beginning, fire insurance rates were not based on the value of the property; the policies were issued, and the rate charged on the rental value of the property. This plan did not last more than a generation and, from that time on, the value of the property has been the basis on which the insurance policies have been issued and the rate determined. It is evident that the business could not have been in existence a very long time before some fires occurred, and even these may have been few among the insured properties. However, they furnished information on which the underwriter could begin to form a judgment as to a correct rate. In the United States in 1795, when a mutual company was being organized in Boston, Massachusetts, a very careful search was made into the number of properties that had been destroyed or damaged by fire for some thirty-eight years previous to the organization of the company. Previous to 1800, there is no other record of such search being made. The experience of the companies showed within about a generation that certain properties or certain kinds of businesses were far more subject to fires than other kinds. A private dwelling, for instance, was not as liable to take fire as a business house, and such facts found expression in different rates for the different classes.
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