British Insurance as an Export
By DEREK MAYFIELD
MOST of us, when we think of insurance, think in terms of the cover on our life or house or car. In other words, we are apt to regard it as incidental to the business side of our private lives. That, perhaps, is the reason why so few people realise it is one of Britain's biggest invisible exports and a very Important source of our overseas earnings. Even less is it realised that, as an export, insurance is the most convenient this country has, for it needs no raw materials, no expensive processing Machinery, no shipping space. It is, in effect, a promise to pay in the event of a certain happening coming to pass.
. Every year, in recent times, this promise, repeated countless times in a variety of forms, has brought our insurers an annual average of more than £500 million in premiums from abroad. That 13 nearly half their total premium income. The net gain to Britain --Which is the amount left over after meeting claims and other expenses—is an annual average in the region of £40 million, of Which a substantial part is made up of `hard' currencies.
The meaning of these figures is that Britain, despite strong and !growing competition, continues to do a great deal more overseas Insurance business than anybody else.
What are the origins of this pre-eminence of British insurance?
In the first place it was an accident of history which enabled this country to be first on the international insurance scene through ,the arrival in London of a simple form of marine insurance at the beginning of the expansionist era of Elizabeth 1. It was brought here by the Lombards from Italy, where, especially in Venice, 111, erchants trading with North Africa had long since learned to band together in a sort of financial club so that the loss of one of their galley ships fell lightly on many and not heavily on few. In Principle this idea of providing financial protection against the hazards of mediwval seafaring was exactly suited to the needs of our Elizabethan merchant adventurers; they, over the years, adapted it to their own world-wide and so more complex needs. Gradually, under the economic and social stimuli of successive centuries, there grew from the main stem of Elizabeth marine Cover the branches of life, fire and accident insurance. As an c.Itample of the process, one of the very earliest life policies, dated In the 1600s, was taken out to ensure that should a certain ship's caPlain be taken hostage by pirates, the ransom money for his release would be forthcoming. When Britain emerged as the workshop of the world at the end °f the Industrial Revolution, British insurance entered a period of Unprecedented development. Not only did our insurers do business (3,I1 a scale beyond the imagination of their Venetian forerunners, tukut they were once again first in a new field : this time to acquire ,tle underwriting experience and techniques necessary to cope with ule new and more abundant risks of a mechanised society. So later ,Witen other countries found themselves in the throes of industrial development they naturally turned to Britain for their insurance protection. And, lastly, British insurers were able to spread their .nlistness by underwriting a great variety of risks all over the world. In other words, because they were in a position to put so many ,eggs in so many different baskets they could not be brought down °Y any one disaster, nor even by any one series of disasters. British insurers have also established an unrivalled and long- standing reputation for integrity by the prompt payment of claims 1!1d for fairness by their tradition of interpreting the spirit rather hart the strict letter of their contracts.
This reputation and the effect it had on their business progress re well illustrated by recalling the great Chicago fire of 1871 and dile great Boston fire of 1872. In Chicago 12,000 buildings were testroyed and the insurance loss reached over £20 million. In , uston 800 houses were razed to the ground and insurers were 'aced with payments totalling i13 million. Many local insurance e°Mpanies collapsed under the burden. But the British companies,
their business well spread at home and elsewhere, took the pay- ment of their portion without a tremor.
These examples of their good faith and demonstrations of financial strength raised the prestige of British insurance the world over, and to a large extent explains why today we continue to handle a substantial share of United States and Canadian insur- ance business—as witness the fact that when, a few years ago, the automatic transmission plant of General Motors was gutted by lire, it was estimated that half the insured loss of $30 million was borne by the insurance market of this country.
Indeed, were it not for the readiness of British insurance interests to accept risks running into many millions of pounds the level of business development as we know it in this and many other countries would have been impossible of attainment. To bring the point nearer home, without these insurance facilities a great num- ber of the things we have come to accept as part of everyday living would .be very costly and available only to the few. The modern life of plenty depends in very great part on mass produc- tion and, therefore, on the investment of large sums of money in modern machinery and factories, in transport and communication systems, and in new sources of power like hydro-electric and, now, atomic energy plants. At the same time, vast quantities of con- sumer goods are continually flowing out from the factories and warehouses to the shops and their customers and inwards towards the factories flow in similar quantities the raw materials of our civilisation. In the circumstances it is pertinent to ask to what extent all this would be so if, in addition to ordinary commercial risks, businessmen were continually faced with the possibility of irreparable financial setback, owing to hazards such as fire, earth- quake, storms at sea, and severe accidents. Illustrative of the importance of insurance protection in this context are some of the various types of cover on large-scale development projects. Buildings and installations in the course of construction and those newly completed are insured against fire and other perils. So are the construction equipment itself, the materials collected on the site and all the contractor's impedimenta. As a rule the management has employers' liability insurance or its equivalent in respect of the entire labour force. Technicians and key workpeople are very often safeguarded by personal accident cover. Usually a contractor has a policy to cover the loss of cash in transit, as in the case of money for wages, and another to protect him against his liability for injuries to members of the public and damage to their property. In many countries a perform- ance bond is demanded of him as a guarantee that his part of the work will be completed in the contracted period.
Here are some typical examples of capital development schemes covered by some or all of these insurances: in Canada new oil pipe-lines to carry the `black gold' from the Alberta oilfields to refineries near major population centres; in Canada, too, the first stages of the $900 million St. Lawrence Seaway project; in South Africa the £2 million Wemmershoek Dam, which is being built to ensure Cape Town's water supplies for many years to come; in Australia a chain of power stations and related projects on which the insurances total L6+ million sterling.
But just as important from our insurers' viewpoint are the millions of smaller risks which they accept as a matter of daily routine. Current and colourful among these are a Red Indian totem pole in Wisconsin, temple images in Malaya, and elephants at work on tea estates in Assam. Closer to home are consignments of crockery on their way from Casablanca to French Foreign Legion outposts in the Sahara and valuable Persian rugs en route from Teheran to British warehouses. And recently, here in London, a British holidaymaker preparing to motor to Southern Spain took out a policy guaranteeing him ransom money in the event of his capture by bandits.
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