Das kommunale Wahlrecht

The nature of capital and income

Bibliographic data

Monograph

Identifikator:: 1882367391

URN:: urn:nbn:de:zbw-retromon-238395

Document type:: Monograph

Author:: Hirsch, Paul http://d-nb.info/gnd/116905670; Lindemann, Hugo http://d-nb.info/gnd/123303990

Title:: Das kommunale Wahlrecht

Edition:: 2., erg. Aufl.

Place of publication:: Berlin

Publisher:: Buchh. Vorwärts

Year of publication:: 1911

Scope:: 51 S.

Digitisation:: 2022

Collection:: Economics Books

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Einleitung

Collection:: Economics Books

Sec. 19] THE RISK ELEMENT 293 and, therefore, could pay only $50 per annum, in consid- eration of which the value of his house, if destroyed by fire, is restored to him, it is evident that he has made a good investment; for he is now assured of a house even should a fire occur, and he has, instead of the risk of fire, merely to pay his annual premium of $50 a year, the capi- talized value of which is $1000. Consequently, his house is worth $10,000 — $1,000, or $9000." Such an insurance rate, however, being based on the mathematical or “pure” premiums, would not pay any profit to the companies conducting it. But even a higher insurance would leave a large margin of capital-value saved to the insured. If we suppose a “loading,” so that the in- surance premium is not $50 but $100, similar reasoning would show that the value of the house when insured would be to the owner $8000 instead of $7000. As long as the loading is not sufficient to absorb all the margin between the $7000 and $9000, it will be advantageous to insure. Between the case of a man owning an individual house, when the element of caution would have a large influence, and that where 10,000 houses are owned by the same corpo- ration, in which case the caution element is almost entirely absent, there are numberless intervening cases. The larger the number of houses owned by one individual or corporation, the less profitable becomes insurance. To express it in the language of the business man, the various risks insure each other. Thus, the North German Lloyd Company finds it profitable not to insure its vessels against shipwreck, be- cause they have so large a fleet that their losses through a period of time can be counted on fairly well in advance. One effect of insurance on the individual is to steady the income from his property. The owner of the house in question would receive, if it were not insured, a net annual income, after providing for depreciation, of 5 per cent on $10,000, or $500 a year until the house was burned, after 1 For a mathematical statement, see Appendix to Chap. XVI, § 3.

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