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Out of this list of projected Cos. only two became completely founded. The Railway Passengers Co. was prov. regis. on the 15th Dec., 1848; and on the following day (16th Dec.) the Railway Assu. Co. was prov. regis.
The Railway Passengers became comp. regis. on 22nd March, 1849. Its operations extended only to insuring against Railway accidents, fatal and non-fatal. The prem. charged to people of the first class was I p.a. to insure £1,000 at death, with proportionate compensation for non-fatal injury. The Co. defined a Railway accident to be an accident happening to a train whilst in motion-a definition admitting of some doubt, as many trains have been run into by other trains while themselves standing still at Railway Stations, junctions, etc.; and the Co. always paid in such cases. The strict definition of a Railway injury is, perhaps, an accident happening to a passenger whilst travelling in a Railway Train, in conformity with the Railway Co.'s By-laws.
On the 24th January, 1850, the Accidental Death Ins. Co., which had been projected in the previous year under the title of the Accidental Death Indemnity Asso., was completely regis. The original object of the promoters had been simply to insure against fatal accidents from all causes, or such accidents as terminated fatally within three months after their occurrence. But almost before business operations had been commenced, the then Actuary of the Co., Mr. Edward Riley, suggested to the Board the desirability of giving the operations of the Co. a wider range, viz., insuring "compensation for bodily injury occurring to any person or persons from any accidental or violent cause or causes not occasioning death" This recommendation was adopted by the proprietors on June 3, 1850; and from that day dates the modern system of Accident Ins.
The original prosp. of the Co. contained the following, and it is impossible to put the arguments in fewer words :
The numerous casualties to which the life of man is liable are subjects of daily occurrence and observation, there is scarcely an individual who cannot refer within the sphere of his own family or acquaintance to instances of sudden or accidental death; and few who cannot look back to their own providential escape from imminent danger. To guard against the consequences of such a calamity, whether happening in the pursuit of business or of pleasure, is the duty of every one, and this Co. will afford to all, according to their circumstances, the means of obtaining so desirable an object.
The difficulties of obtaining reliable data on which to base the rates of prem. were great, but were overcome. The rates for persons not exposed to any special risk from occupation were fixed as follows:-To cover death by accident £1 p.a. for £1000. To cover death and compensation for non-fatal injury £3 10s. p.a. securing £1000 at death, and £5 per week during entire disablement, with a sum not exceeding £10 for medical attendance during the injury. For persons of hazardous occupations there were special rates; as also for loss of leg or arm, or total loss of sight. For Railway Accidents only the prem. was 10s. p.a. for £1000 at death and £5 per week compensation during disablement.
The scheme of allowing medical expenses was based upon the theory that every one injured should have good medical attendance, and the Co. would provide some compensation for the medical man. It was thought that efficient medical supervision would lead to speedy recovery from the injury sustained. The practice too often worked the other way. In cases of slight injury, the medical men would keep the patients on the funds of the Co. until the allowance for medical expenses became exhausted: thus too often the Co. had to pay the claimant £5 per week, while the doctor was working up his bill to the 10 limit. After a few years trial, the scheme of medical expenses came to be abandoned; and the allowance to the insured increased to £6 per week under a £1000 policy-the insured paying his own medical attendant.
Among the early Directors of this pioneer Co. in the business of ins. against "accidents from all causes," were several gentlemen who believed that the great masses of workmen in the manufacturing districts would be among the first to avail themselves of the scheme. Never was a greater misapprehension. Deputations were formed; meetings were held; but no practical result followed. Again and again the attempt was made; but with unvarying non-success. The present writer may claim the credit of pointing out to these disappointed gentlemen that the real field for their enterprise lay with the professional and mercantile classes. The new experiment was inaugurated during the year 1852. Its success was very speedily proclaimed. We may put on record here as a matter of history, and as indicative of the tardy growth of this now great branch of Ins. enterprise, the income of this Co. during the first nine years of its existence, viz. :—
On the 16th July, 1850, the Railway Assu. Co. (prov. regis. in 1848) became completely registered, and commenced business. Its scheme was to charge a single premium of £2 25. for the whole of life to cover the risk of being killed while travelling by Railway. This Co. did not limit its ins. ir. the same manner as the Railway Passengers Co.; but its pol. covered accidents and injuries incident to Railway travelling ;-such as stepping from the train to the platform, being run against by the Luggage barrows, and other incidental risks.
The prem. was very much too low for the risk undertaken, and the Co. only maintained its independent existence for about two years.
In 1851 the Maritime Passengers Ins. Co. was projected, for the purpose of affording facilities of Ins. to those whose occupations required them to travel by sea, analogous to those afforded to persons who travelled by land. The Co. also afforded facilities of Ins. to Captains and Mariners, both for Accident Ins. and L. Ins.
We may state here that the individual hist. of each of the preceding and following offices will be given under the name of the Co. All we contemplate here is a hist. of the origin and development of ACCIDENT INS.
In 1852 the Marine L. and Casualty Co. was founded, chiefly with the view of ins. the lives of seafaring persons at moderate rates of prem. We shall notice this Co. again under MARINERS' LIVES.
In 1854 the Travellers and Marine Ins. Co. was founded under influential auspices. Its object was to grant pol. combining both land and sea risks. This was accomplished by "Whole World Tourists Pol.," granted at the rate of £1 10s. p.c. p.a. For General accident pol. the Co. charged only £2 p. £1,000; but this rate excluded the risks of "Horse accidents" and "Machinery accidents" from the pol. For these risks they charged £1 p. £1,000, which brought the rate up to £3. Great practical difficulty arose in reference to the exclusion of Horse accidents. Persons readily ins. at the lower rate, but if they met with an injury from riding or driving always expected to be paid-asserting by way of extenuation that it was not their practice to run such risks-failing to see that it was their inexperience which too frequently occasioned the injury. This Co. plays a prominent part in the future hist. of Accident Ins. It soon afterwards, under the authority of a special Act of Parl., became Accidental Death Co. (No. 2).
In the same year (1854) the Marine and General Travellers Ins. Co. was formed. It was an obvious parody upon the preceding Co. It had no new features, except that its rates were absurdly low, and marked its failure from the beginning.
During this year the Crimean war broke out, and the Accidental Death Co. caused a series of calculations to be made with a view to Ins. the L. of officers against death in battle. A considerable business was transacted; but the unusual mort. among officers during that war absorbed the profit the office would otherwise have made by the venture. In 1855 the General Accident and Compensation Co. was founded. It intro. the feature of granting the weekly compensation without any sum at death; and also that of "Family Insurance." Thus a family consisting of parents and not more than eight children under 21, might ins. to receive 1000 in case of death of any one of them by paying 18 p.a. The rates for ordinary accident business were absurdly low.
In the same year (1855) the Railway Passengers Co., which had previously, as its name implies, confined its business to ins. against accidents arising from travelling on Railways, took up the General Accident branch. Instead of allowing any special and distinct sum for medical attendance, it increased the weekly compensation to £6, charging to persons of non-hazardous occupations £3 p.a. This was an improvement in principle, although it is very doubtful whether the increase of the weekly compensation has not increased the tendency to fraud.
In 1856 the Norwich and Lond. Accident and Plate-Glass Ins. Co. was founded. Regarding Accident Ins., it offered no especially new features. It prudently placed the weekly compensation at £5 in respect of a £1000 Ins., and charged a prem. of £2 55. excluding hunting, shooting, steam engine and machinery risks. Including these, the rate to persons of non-hazardous occupations was £3 p.a. for £1000 at death, and £5 per week during non-fatal disability from accident.
In the same year the National Alliance Life Co. was founded, having an Accident branch. It embodied no new features, but fell into the error of unduly low rates.
The year 1857 marks a somewhat important era in the hist. of accident Ins. The business was new, and its managers had not then learned to fence it round with those precautionary restrictions which later experience has shown to be so necessary. In a word, it was peculiarly open to imposition and fraud; and a marked combination of cases bearing evidence of such tendency presented themselves. It was in that year that a son, under pretext of a run-away horse, drove his aged father into a deep river at a point where there was no prospect of help at hand. But the father clung to the son, and both were drowned. Both were heavily insured-the father but a few weeks previously had been the inmate of a union-workhouse! In the same year, a large miller and maltster ins. under two designations through two different agents of the same Co. with each for £2000, and very shortly afterwards was found dead in his own mill-stream! It was in that year that a well-known stock-broker placed on his dressing room table two little bottles precisely the same in appearance: one containing medicine necessary for his ailment; the other poison. In the morning the man was found dead in bed: the poison bottle was empty. Some £14,000 was at stake upon these, and some other cases occurring about the same time. The Directors of the Accidental Death Co., upon whom these claims came-the orig. and leading Co. in the business-grew out of heart, and resolved to relinquish the enterprise. The business was trans. to the Travellers and Marine, upon terms which secured the orig. shareholders from loss-and henceforth
conditions were introduced into the policies, and regulations adopted in the conduct of the bus. to prevent such wholesale plunder.
This transfer took place in September, 1857. At that juncture the present writer, in concert with the late Professor de Morgan, made a very complete investigation into the past experience of accident Ins. business. It was found that for many occupations the rates theretofore charged were too low-and some occupations could not be ins. at any rates, with the prospect of profit to the office. In all about 700 occupations were embraced in the investigation. They were ultimately reduced into four classes, as follows:
Class I. included professional gentlemen and others incurring no liability to accident by reason of their occupation.
Class II. included Master Tradesmen, and others, who although concerned in constructive occupations, took no personal part therein. In this class the distinction between masters and workmen arose a master tailor, for instance, is a different risk from a workman: a slight injury to the hand might entirely disable the workman; while the master sustaining a similar injury could yet superintend his business. The same as to a master builder, distinct from a working bricklayer, carpenter, mason, etc.
Class III. included risks arising from constructive operations, and applies to the mechanical and operative classes generally.
Class IV. applies to still more hazardous occupations, where great personal danger is involved in the calling.
There was indeed a 5th class—those who should not be insured at all. With this class the "moral hazard" of the bus. lay.
The rates of prem. were revised and adapted to the first four classes. It may be said that the great secret of the business lies in the adoption of such a classification—or more technically speaking, in excluding certain occupations from the class to which they do not rightfully belong. The rates are only adapted to and remunerative for each class, so long as the classification is maintained.
Since this period there has not been so much competition- that is, so much undercutting in the rates. They have become nearly uniform. Each Co. can regulate its classification by its own experience.
In 1863, the Friend-in-Need commenced the business of Accident Ins., pirating rates, conditions of Ins. and everything it had in connexion therewith, from other offices, and very speedily, as was to be expected, bringing loss and annoyance upon all concerned.
In 1863 also the business of Accident Ins. was intro. into the U.S. by Mr. Batterson, the founder and president of the Travellers Ins. Co. of Hartford, a Co. which has grown into the most gigantic proportions, and has been conducted with marked success. In four years it issued 130,000 policies. It has had a host of imitators, but we believe it, and the Railway Passengers Co., which sprang out of it, are the two sole survivors. The Travellers Co. originated and carries on the business of Life and Accident Ins. combined. In this year also the National Union Life and Limb Ins. Co., was incorp. by special charter of the legislature of the State of New York, with a capital of 100,000 dols., for the purpose of making ins. upon the lives and limbs and health of the soldiers, sailors, and marines in the army and navy of the U.S. of America. We do not know with what pecuniary result the bus. was conducted. In the following year it extended its bus. so as to grant Ins. to the general public.
In 1865 the Accidental and Marine Ins. Corp. was founded, ostensibly for the bus. of Marine Ins., but some of its Directors being at the time of its conception also Directors of the Accidental Death Co. (No. 2), a fusion of interests took place. The step was thoroughly unwise. There is no sort of analogy between the two branches. Events speedily demonstrated this; and in the following year the accident portion of the bus. was resumed by its former Directors: they, however, became unwilling to retain it, in consequence of certain complications arising out of the preceding events, and handed it over to another Co.
In 1865 also the Birmingham Alliance L. Co. was founded, and commenced the bus. of Accident Ins. Its classification was defective; especially having regard to the locality of its operations. It did not long continue the Accident branch.
In the same year (1865) the International L. Ins. Co. commenced the bus. of Accident Ins., and continued it on a limited scale till about July, 1868, when that branch was trans. to the Imperial Union. Its classification was extremely defective.
It was we believe in this year also that an Accident Ins. Co. was founded in Australia, by a gentleman who went from here ostensibly to found a branch for an English Co. The experiment of a local office did not succeed it was said because there was not sufficient scope to obtain an average of risks. The English office contemplating a branch there may be regarded as having had a most fortunate escape.
In 1866 the Accident Ins. Co. was founded. It took over the bus. of the Accidental Death Co. (No. 2). Its officers were among those who had aided in working up the bus. of the orig. Accidental Death Co., and under their auspices the present Co. speedily assumed a leading position. The risks were very carefully gone over and a large amount of bus. rejected, to the infinite advantage of the shareholders.
This Co. in addition to carrying on its orig. bus. bas organized a system of Ins. known
as the "Specific Compensation Class." The advantage claimed for this plan over the ordinary system of Accident Ins. is that the amount of compensation for any particular injury is fixed from the time of taking out the policy. Here is the scale in relation to a 1000 policy-that is, if the ins. desire to protect his family to the extent of £1000 in case of his death by accident, he protects himself by becoming entitled to the following scale of compensation in respect of any of the non-fatal injuries enumerated; with a general allowance in case of being entirely disabled by any accidental injury not included in this schedule.
NOTE.-1 for every day (except Sundays) beyond a week up to 100 days, whilst confined to bed by order of any duly registered practitioner, for injuries not included in the above table.
Now one of the most remarkable features about this scheme is its wonderful resemblance to that of 1665. We are, however, in a position to affirm that the existence of the first was not known when the second was compiled. The scheme was devised with a view to lessen some of the defects which attach to the bus. under the ordinary method. If this plan of insuring were adopted generally by the accident offices, a very large proportion of the fraudulent claims they now sustain would be at once got rid of.
In the same year (1866) the Imperial Union Ins. Co. was founded, having an Accident Ins. branch. It made no prominent feature of the bus. until it took over the accident branch of the International Life in 1868.
About this period the bus. of accident Ins. was introduced, by special desire of the Emperor Napoleon, into France. The plan there adopted was that of collective Ins.— the insuring bodies of workmen en masse. The Co. undertaking the bus. was the Sécurité Générale. Its two first balance sheets showed, as was to be expected, very serious losses. In Germany a small accident bus. has been carried on by the Thuringia Co., but the bus. has never been thoroughly taken up there.
In 1867 the Colonial Assu. Corp. was founded, and it inaugurated here, and still carries on with success, the system of Life and Accident Ins. combined: a plan of ins. possessing so many advantages, that it is destined sooner or later to occupy a more prominent position. The add. to the life rate is very small; the advantages to the insured very considerable.
In 1868 the General Accident and Guarantee Co. was founded. Its special feature was the charging a reduced rate-that is, placing in a more favourable classification Architects, Building Surveyors, and Civil Engineers, as compared with other Accident offices. The Co. was one of great respectability; and in 1870 it became united with the Accident Co. The founders of this Co. originated the idea of allocating some portion of the profits to the pol.-holders, as in L. Ins.
In the same year the Home Ins. Asso. was founded; and it was one of its features to grant collective Ins. against accidents to bodies of workmen a class of bus. which all former experience had shown to be most undesirable in the light of realizing any profit.
In 1869 was founded the London Guarantee and Accident Co. There was no very special feature in its accident branch, except that its classification was very liberal to the insured. This, of course, can and will be remedied by future experience.
In the same year there was founded the Sovereign Accident Co. The scheme of this office-which was but an off-shoot of the General Accident and Guarantee-was that of granting as much benefit to each class of persons ins. as £1 (this is one sovereign) would pay for, viz., £300 in case of death, and 2 p. week in case of non-fatal injury.
In 1870 were founded several Accident Ins. offices, viz., I. City Accident Co., which
immediately on its birth became associated with the Accident Co. (No. 1) and the General Accident Co., constituting that happy tria junta in uno—the Accident Ins. Co. (No. 2). 2. The Commercial Accident Co., which announces a very special feature, viz., That the profits will be ascertained at the end of every year, "and a bon. equivalent to one half the net profit (after deduction for reserve fund) allowed on the prem. for the ensuing year upon all pol. that have not been claimed upon during the year." We think every 3 or 5 years would have been quite often enough to ascertain and distribute the profits on a small accident bus.
3. The Carriage Accident Co.-This we shall speak of specially under its own head. In Fr. both horses and carriages are ins. against accident; and the bus. appears a most legitimate one: due precaution being taken against imposition.
We have now, we believe for the first time, traced the hist. of ACCIDENT Ins. To have given more details would have occupied too much space. The subject will again present itself not only in the histories of the individual offices, but in reference to the Ins. of Mariners' lives, war risks, etc.
In the practical working of this bus., there are difficulties to be encountered which do not present themselves in most other branches of Ins. In Life Ins. the claimant must be proved to be dead before a claim is paid; and in reference to fatal accidents, of course the same rule prevails. In Fire Ins. there must have been a fire, and there must therefore be some visible evidence of loss. In reference to non-fatal injuries, frequently no such means of proof are at hand. In the case of broken limbs there is direct evidence. In the case of scalds and burns, it is well known that they have been personally inflicted for the sake of creating claims. In the case of sprains and invisible injuries, whether the claimant can't work or won't work, remains occasionally a mystery. The practical experience of a well trained staff, and above all a sagacious, able, experienced medical adviser, are of the first essentials in the conduct of so special a business.
It may be said that about 1 out of every 12 persons insured makes a claim; and that to every fatal claim, there are at least 100 non-fatal injuries. Somewhere about the same proportions obtain in the U.S.
In the course of twenty years experience, many points of practice have become settled; some of them through the medium of the law courts; although there has been surprisingly little litigation when the nature of the bus. is considered. It has, for instance, been decided by the Courts that Sunstroke is not a cause of death within the scope of Accident Ins. This was decided in the case of Sinclair v. Maritime Passengers Co. That a person ins. under a non-hazardous, but intending immediately afterwards to assume a hazardous occupation, would be guilty of fraud (Bunyon). That notice of death must be given to the Co. within the time stipulated in the policy. This was settled in Gamble v. Accident Co. before the Irish Courts in 1869. That Erysipelas following a slight injury is not a direct consequence of the accident, and therefore not covered by an accident policy. This was decided in the Exchequer Chamber in the case of Smith v. Accident Co. in 1870. And that death from inherent disease, although accelerated by accident, is not within the meaning of an Accident Ins. This was decided in the case of Cross v. Railway Passengers Co. before Baron Bramwell and a special jury in July, 1871. ACCIDENT INS. : Stamp duties on pol. When the Accidental Death Co. was about to commence bus. in 1850, its officers applied to the Stamp Office authorities to know what stamp should be affixed to the pol. The reply was: "Same as on life pol." This was simply absurd. On a £1,000 pol. against Railway accidents, for which the Co. charged IOS. prem., the stamp duty would be £3. The result was that for several years the Co. issued unstamped pol., with the full knowledge of the stamp authorities. Duty has since been levied as follows:
1853. By 16 & 17 Vict. c. 59-6d. for every £50 ins. where the whole sum does not exceed £500; Is. for each 100 where sum ins. did not exceed £1,000; and 10s. p. £1,000 or part thereof beyond. Thus a £1,000 pol. required a 10s. stamp. 1860. By 23 & 24 Vict. c. III, a special scale of stamps was imposed upon Accident, Plate Glass, Hail Ins., etc. pol. as follows: Where prem. did not exceed 2s. 6d., stamp Id.; exceeding 2s. 6d. and not exceeding 5s., stamp 3d.; and 3d. add. for each 5s. or fractional part thereof. This was a very great improvement. 1865. By 28 & 29 Vict. c. 96, this scale was re-enacted.
1870. By 33 & 34 Vict. c. 97, "for any payment agreed to be made upon the death of any person, only from accident, or violence, or otherwise than from a natural cause, or as compensation for personal injury," etc., the stamp on the pol. was reduced to one penny.
ACCIDENT INS. CO. LIM. (No. 1).-This Co. was founded in 1866, with an authorized cap. of £50,000, in shares of £2. It was formed to take over the business of the Accidental Death Co. (No. 2), and rapidly rose to a successful position. In 1867 it took over the Accident bus. of the Birmingham Alliance Life, which was small, but respectable. In 1868 it organized a system of Specific Compensation Ins., which we have spoken of in our HIST. OF ACCIDENT INS. In 1870 it was reorganized, and became Accident Ins. Co. (No. 2), which see. In rather more than three years, the shareholders received back in dividends and bonuses more than the entire paid-up capital of the Co.