Election 2008 is over! The day after is an emotional and adrenal let down for many as nearly two years of political wrangling are over - at least for a little while. Some readers are very happy and others, well, aren't. Today might be the right time to decompress a little and just unwind over a few of the insurance industry's facts, myths and legends. There is no guarantee that any of these tidbits will make you popular at parties, but you may find this informative and even interesting.
• William Gybbons was the named insured on the first modern life insurance policy placed on June 18, 1536; a one-year term policy. Gybbons died within that year on May 29, 1537, after being hit by a bullock cart (no, seriously). The life insurance carrier refused to pay; stating that a year constituted 12, four-week months. Applying this argument, the policy would have ended on May 27, two days before the trample-and-run (or at least "walk slowly") incident. Obviously the court sided with the widow and forced the insurance carrier to pay. (Found in "What's Wrong With Your Life Insurance?" by Norman Dacy.)
• Benjamin Franklin founded America's oldest, continuously active insurance company in 1752. Franklin and several prominent business associates established the Philadelphia Contributorship for the Insurance of Houses from Loss by Fire. The Contributorship, as is now its common reference, was a proactive insurance carrier refusing to provide coverage to houses and other structures that were not constructed according to strict building standards. During the British occupation of Philadelphia in 1777, the Contributorship hired a chimney sweep to maintain the chimneys of insured houses that were still occupied. (http://www.ushistory.org/tour/tour_contrib.htm)
• Lloyds of London actually began in a coffee shop, Lloyd's in London (imagine that). Lloyd's coffee shop was a gathering place for ship captains, importers/exporters, merchants and investors. The combination of these diverse parties with a common interest in goods travelling into and out of England by sea led to business deals allowing each participant the opportunity to make money.
Before a merchant or other financially-interested party would entrust his goods to a sea captain, he wanted to assure that either the goods would arrive at their destination or that there would be some kind of financial guarantee if the cargo ended up at the bottom of the ocean.
Financial types visiting the coffee shop began contractually agreeing to indemnify (make whole) the owner if the goods were taken by the ravages of the sea, in exchange for a premium. If nothing happened to the ship, the investor/guarantor kept the premium. When ships and cargos were lost, the investor had to make good on his promise.
No one investor was willing to insure the total value of a ship and its cargo. A detailed description of the ship to be insured, its captain, the cargo, its route and destination was circulated among the participating investors. Each investor decided how much of the total value of the risk they were willing to "insure;" writing his name and the percentage under the description - thus they became known as "underwriters."
• Sir Edmund Halley (yes, the same one for whom the comet is named) constructed and published the first known mortality tables in 1693. Data used to develop the tables were taken from a very small sample, a small town in eastern Germany (now a part of Poland), over a four year period. It is unlikely that his findings could be considered "actuarially accurate;" but it was the first step in applying probability to estimate human life. Insurance companies and governments would not make use of such life-expectancy tables for at least another century. (Taken from "Against the Gods: The Remarkable Story of Risk").
• Fire insurance carriers were part of the impetus for modern fire departments. Prior to the creation of municipal fire departments, volunteer fire departments, having no clear district lines, "competed" with one another to extinguish fires - the department that got there first and successfully doused the flames got paid (yes, there was a profit and even political motive). As the number of fire insurance companies grew so too did the competition among fire departments. Insurance carriers would supply its insureds with "fire brand" placards that were placed on the front of the building to indicate that there was insurance coverage and which carrier provided the protection (so the department would know who to bill). Fire departments knew that if insurance coverage was in place they would get paid more and quicker than just trying to bill the building's owner.
Fire insurance companies, looking for a better way to protect their investment, eventually formed their own fire brigades. When a fire alarm sounded all the local fire departments would respond; if the insurance carrier's brigade arrived first but did not find their fire brand on the building, legend tells us they would watch it burn letting the next department to arrive fight the fire. Whether or not this legend is true is unclear, but if you're not going to get paid, why fight the fire?
Comments
I've seen lot's of claims, but denying it on the basis they used is truely a first!
However, the building-placard's terminology is not "fire brand," which is either a piece of burning wood or a rabblerouser/trouble maker. The term is "firemark" (some spell it as one word, some as two words).
I've written at some length about Franklin, the Philadelphia Contributionship and other moments in the history of insurance. For instance, you can read at length about "How Benjamin Franklin Became The 'Father of American Insurance'" at this link: http://www.bankinsurance.com/editorial/articles/pdfs/bim/1998-ben-franklin.pdf.
That article also contains a picture of the Philadelphia Contributionship's firemark, which later was used by the Pacific Insurance Conference or PIC as its logo. The PIC, offering biennial conferences of the world's senior life insurance officers since at least 1961, used the logo until just a few years ago when Oppenheimer Funds, which had used a similar logo only since 1964, frightened the PIC into dropping it by threatening trademark action. Strange, since the Contributionship (www.contributionship.com) has been using that logo (firemark) since 1752, and it never objected to its use either by the PIC or, apparently, Oppenheimer (www.oppenheimerfunds.com/).
If you are interested, there are a number of websites that post photos of many historical firemarks, including www.firemarkcircle.org and www.iicfiremark.com/historic.htm.
"True Believers" (http://www.bankinsurance.com/editorial/articles/pdfs/non-bim/true-believers.pdf) discusses, among other historical events in insurance, the subsequent development of the Northampton [mortality] Table by Dr. Richard Price (1723-1791) that became the basis for premium calculations at England's Equitable Life for the next century.
Price helped place the first keyman policy, as it was called in the dark and olden days, in America. That story is told here: http://www.bankinsurance.com/editorial/articles/pdfs/non-bim/IB-2001-02-washingtons-sculptor.PDF.
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