The Insured Warehouse

A merchant insured his warehouse against fire for its full value. Before the insurance, he had kept water barrels at every corner, trained his workers in fire response, and repaired every fraying rope.

After the insurance, the barrels went unfilled. The training lapsed. The ropes frayed.

“Why bother?” he thought. “If it burns, I’m covered.”

The insurer had transferred the financial risk. But in doing so, he had also transferred the merchant’s reason to be careful. The policy that protected against disaster quietly made disaster more likely.