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Private Fire Prevention
Here's an interesting story:
In Idaho, when the Castle Rock wildfire started with a lightning strike, broke out and started to rapidly spread, hundreds of high-end homes were immediately evacuated. At that point a national insurance company which caters to America's wealthy decided that it needed to act quickly. The insurance company sent a private crew of firefighters to Wood River Valley, near Castle Rock, to protect 22 homes that it has insured for millions of dollars.
...The insurance company provided a fire truck and two man team to douse the insured homes with Phos-Chek, the same fire retardant dropped from U.S. Forest Service aircraft.
Insurance services like this have a long history not just in fire fighting but also in crime-fighting. In 18th and 19th century Britain long before the advent of government police, members of the public organized themselves into prosecution associations - essentially insurance clubs that would pay for the investigation, detection and prosecution of crime. You can still see a faint imprint of this lost system today when insurance companies hire detectives to investigate large property crimes. See The Voluntary City for more.
Posted by Alex Tabarrok on October 2, 2007 at 07:08 AM in Economics | Permalink
Comments
Note the tone of the full story. Apparently the reporter for this trial lawyer's website feels there is something immoral or sleazy about AIG offering a premium loss prevention service.
Posted by: Acad Ronin at Oct 2, 2007 7:26:09 AM
Obvious further viewing: Double Indemnity. It looks like an open-and-shut accidental death. But something looks fishy to insurance investigator Barton Keyes (Edward G. Robinson). Bad news: it's the perfect crime. Good news: Barton Keyes is the perfect insurance investigator.
Posted by: Nick Hare at Oct 2, 2007 7:29:16 AM
There is something immoral: If Regular Joe tries to go the the area and salvage a few valuable possessions from his trailer home, he'll be told to "stay back, the area is closed."
If private FFs get in trouble, Municipal FFs have to go save them. Indirectly, lives of Municipal FFs are being risked by letting people through, but only if they're there to save rich people's property. (keyword: 'property', not 'lives').
Posted by: Pablo at Oct 2, 2007 8:02:45 AM
I don't know if this is just as interesting, but a majority of Danish cities have outsourced their firefighting to a private company, Falck (http://www.falck.com/home/business_areas/fire_services). They operate 60% of Danish fire trucks and 90% of the ambulances.
Posted by: Guan Yang at Oct 2, 2007 8:30:03 AM
Once upon a time virtually all firefighters were paid for by insurance companies.
Yet, it has been completely replaced by public firefighters.
But I never see any informed discussion of how and why this happened.
I've seen some stories, but never any good studies.
Does anyone know of any good studies of the subject.
Posted by: spencer at Oct 2, 2007 8:47:44 AM
Yours truly
Johnny Dollar
Posted by: Floccina at Oct 2, 2007 9:26:25 AM
Private "fire fighting" companies also had a nasty habit of _starting_ fires, too, as as to make sure they had enough business. Moral hazard can run in more than one direction, after all.
Posted by: Matt at Oct 2, 2007 11:49:52 AM
Private fire fighting got a bad rep because the competition between fire companies got violent and let buildings and blocks burn down rather than work together.
I've read stories of colonial America where if you didn't have the right insurance marker on your house, the nearest fire dept would just watch as your house and possessions burned to the ground because they worked for a different insurance company.
In this case though, the only danger of private fire crews is the politicians might get lazy and cut the public service so only the wealthy get good fire protection.
Posted by: Travers Naran at Oct 2, 2007 12:50:07 PM
The Romans take on private firefighting:
"Most notorious was his acquisition of burning houses: when Crassus received word that a house was on fire, he would arrive and purchase the (apparently lost) property along with surrounding buildings for a modest sum, and then employ his army of 500 clients to put the fire out before much damage had been done. Crassus's clients employed the Roman method of firefighting -- destroying the burning building to curtail the spread of the flames."
http://en.wikipedia.org/wiki/Marcus_Licinius_Crassus
Posted by: Todd Fletcher at Oct 2, 2007 12:52:15 PM
Out west, the 2002 fires in AZ and CO, the Los Alamos fire, and the Klinekole fires were started by firefighters or other public employees, so I don't know that is a difference.
Posted by: Eric H at Oct 2, 2007 1:06:17 PM
Competition leading to violence between fire fighting companies has a little bit of truth to it but is mostly a myth promoted by rent-seeking municipal firms eager to discredit volunteer fire fighters. For a more complete view of what was going on see:
Government Prohibitions on Volunteer Fire Fighting in Nineteenth-Century America: A Property Rights Perspective
Fred S. McChesney
The Journal of Legal Studies, Vol. 15, No. 1. (Jan., 1986), pp. 69-92.
URL: http://links.jstor.org/sici?sici=0047-2530%28198601%2915%3A1%3C69%3AGPOVFF%3E2.0.CO%3B2-1
Posted by: Alex Tabarrok at Oct 2, 2007 2:12:19 PM
If private FFs get in trouble, Municipal FFs have to go save them. Indirectly, lives of Municipal FFs are being risked by letting people through, but only if they're there to save rich people's property.
I wouldn't imagine that any states give private firefighters the legal right to cross police/fire lines, so they can operate at fire scenes only if the authorities allow them to do so. That would seem to indicate some degree of acceptance.
Posted by: Peter at Oct 2, 2007 5:08:11 PM
The original article reads:
"Although it was not a private fire, the team sent in by AIG were allowed access to areas that were closed off to the general public in order to protect the specific homes insured by AIG Private Client Group that were entitled to the loss prevention services."
It seems these private fire companies were provided privileged access.
Posted by: Pablo at Oct 2, 2007 6:20:56 PM
I thought the link was pretty funny in denouncing the insurance company for fighting fires. "Helping out rich people, how awful". I always heard firefighting was a public good because it spreads and therefore you can freeride as they will need to put out the fire in your property to protect that of others.
Posted by: TGGP at Oct 2, 2007 9:49:37 PM
Barnaby Jones and Banacek worked for insurers.
Posted by: PSHRINK at Oct 2, 2007 9:55:46 PM
My claim wasn't that old-style private fire companies fought with each other, to their client's detriment (though I suspect it happened, too) but that they were basically protection agencies of the mob sort, at least party (sometimes largely) protecting their clients from fires _they_ would otherwise start.
Posted by: Matt at Oct 3, 2007 12:03:09 AM
Nothing wrong here!!!
The insured paid a 'premium' for 'premium service'.
Guess that you get what you 'pay for'.
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