Insurance History--Property Insurance Starts in American: Did Ben Franklin Hate Trees?

 

DAWN AND GROWTH OF AMERICAN PROPERTY INSURANCE

Michael Sean Quinn, Ph.D., J.D., Austin. Texas

More or less, everyone knowing anything about insurance knows that in the 1750s Benjamin Franklin cooperated in creating the first (or among the first) fire insurance company and the first (or among the first) life insurance companies in American. The content of the fire insurance policy is less known. It is certainly one of the earliest examples of a hazard in the face of which an insurer would refuse to grant coverage. 

The context was this. There were citizen volunteer fire fighting groups. There were also fire fighting companies that went forward on the basis of using a sort of volunteer. Both types preexisted fire insurance. Owners of dwellings would pay companies to render fire fighting services should such a disaster happen. The various companies would have "marks" places upon the houses they would service. Levels of cooperation developed between the first insurers and the fire fighting companies. 

Franklin's company, Philadelphia Contribution was a conceptual outgrowth of London's Hand-In-Hand Insurance, and its mark resembled its origin, the mark being hand clasped together. 

in 1781, toward the end of the American Revolution, a number of years after its foundation, Contribution decided to refuse to issue insurance on dwellings that had trees growing in the front yard, according to one source. The reason was that the directors believed that the hazard of having a tree present in the front yard of a building would make it more difficult to fight a fire, and this would increase the size of the loss amount to which the damaged insured might be entitled. If the premises upon which this underwriting decision was made, then it might be a sound judgment, of course.  Remember, Contribution's decision-makers were working without statistical and probabilistic information or techniques.

 This was not a popular decision. Consequently, in 1784 the Mutual Assurance Company grew out of this social fact. It would insure exactly what Contribution would not. Its mark was a green tree cast in lead, fastened to a shield-shaped board attached to the front of a covered house.  (The use of insurance marks had already been around for this purpose in England for some time, and on the continent as well, though for different reasons. Obviously, this pattern of usage is a remembrance of the use of marks that is familiar from the Book of Exodus.)

The company of "Scientist Ben" has lasted down to the present day, my research shows. Mutual Assurance lasted for a very long time as well, says my source. There does not appear to be a history as to how and/or how well either of these companies performed their adjustment functions given their underwriting decisions. I have the impression that Contribution gave up its anti-tree position as time went along. 

See F.C. Oviatt, "Historical Study of Fire Insurance in the United States," 335-36 ANNALS OF THE AMERICAN ACADEMY OF POLITICAL AND SOCIAL SCIENCE (Sept. 1905) 

Michael Sean Quinn, 1300 West Lynn #102, Austin, Texas 78703, mquinn@msqlaw.com