SUGGEJSTIONS FOR RATING FOREST INSURANCE 705 



certain technical difficulties. It maintains the principle of average and 

 distribution — yet embodies the idea of statistical justification of rates." 

 "Dissatisfaction must co-exist with any rate making system which 

 could not be justified by statistics. In the field of rating theory the 

 important question is, Will the companies endeavor to continue past 

 methods of measuring hazard or will they cooperate in the support 

 of a new system intended to furnish the public with the proof of 

 equitableness which it demands ? Every indication is that the latter 

 is one of the great imminent developments of fire insurance." ^ 



FOREST FIRE INSURANCE 



I have outlined the methods of classifying and rating risks in regu- 

 lar fire insurance at some length, because I believe there is no great 

 difference in principle between fire insurance of buildings and of for- 

 ests. Given a reasonable amount of protection, the hazard is no 

 greater, and may be considerably less, in the case of forests, and it is 

 certain that with proper classification and rating of forest risks such 

 insurance will be found very practicable. 



Forest fire insurance has been developing in a number of European 

 countries for several decades, but has not made as much progress as 

 it might have made because the classification of risks has been very 

 crude, and the rates have been too high in comparison with the hazard, 

 therefore unattractive to forest owners. These rates are fixed arbi- 

 trarily and always with a wide margin of safety, because of the lack of 

 accurate and reliable statistics of fire losses. Such classifications as 

 Rave been made are based on differences in forest type (conifers, decid- 

 uous, or mixed ) and in age classes, and allowances are usually made 

 for public and private protection, and for such special risks as railroads. 

 Regional divisions, to allow for climatic differences, have been sug- 

 gested for classifying French forests. 



GE.VERAL PRINCIPLES GOVERNING FOREST FIRE HAZARD 



In the United States, witii its great extent and its diversity of climate 

 and of types of forest, much more detailed classification will be neces- 

 sary than in Western Europe. The tentative plan for classifying and 

 rating risks which is outlined below is based on these considerations: 



1. The damage done by forest fires depends upon the area burned 

 over, the value per acre of the burned forest, and the projiortion of 

 that value which is destroyed by fire. 



'Robert RicRcl — Fire Insurance Rates: Problems of Cooi)oration, Classifica- 

 tion, Regulation. Quarterly Journal of Kconomics, August, 1916. 



