a percentage of gross premiums which include expenses, so that a reduction in expenses would bring a reduction in reserves, which is far from logical. It has been suggested that the average cost method might be applied to the more recent policies as a check upon the fixed loss ratio method. CHAPTER XIII INSURABLE INTEREST IN FIRE INSURANCE A common statement in texts on insurance is that policies of insurance relating to the loss or destruction of property promise reimbursement based on indemnity. On this principle the insured would always receive the actual cash value of the property at the time of the loss. This is not quite accurate, in view of the valued policies issued in marine and certain forms of casualty insurance and other less obvious violations of the principle; but it is true that the law has in the main gladly recognized the protection against moral hazard which is given by an actual interest in insured property approximately equivalent to the face of the policy. Reasons for insurable interest.-The purpose of all property insurance is, therefore, to indemnify a loser. If only those who suffer loss are to receive reimbursement, none save those who may be injured should be permitted to secure protection, and then only to the extent that they are threatened with loss. Fire insurance, and life insurance covering the life of a debtor in favor of a creditor, present similar restrictions. But we have seen that the insurable interest of a person in his own life is usually unlimited, the courts of many States having decided that it is impossible to calculate the value of human life. In marine and casualty insurance also, the interpretation of insurable interest is relaxed. Fire insurance policies issued for more than the maximum possible loss, however, are considered over-insurance, and while in the absence of fraud or "valued policy laws" these policies seldom work harm, the total absence of any interest in the property makes an insurance policy on the same a mere wager. A person holding a policy of this type cannot gain by the continued existence of the property and is not interested in its preservation; on the contrary, he can make a profit by its destruction and the moral hazard is therefore tremendously increased. Periods of poor business and decreasing values have given ample proof of this. Where the value of the |