The Growth of Accident .
Insurance
By J. W. J. LEVIEN
ACCIDENT insurance today is the biggest single class of non-life business transacted by the British insurance market. In 1954 the accident premium income of the British insur- ance companies was £307 million, the previous highest total was £288 million in 1953. This year the premium income from fire insurance was much the same as in the year before : £213 million in 1954, £210 million in 1953: and the marine insurance premium was slightly down at £59 million for 1954 against £60 million for 1953. Another feature of the British accident insurance market is that two-thirds of its business is derived from abroad: thus it makes the major contribution to British insurance's total overseas premium income of £600 million. All of which, I think, is reason enough to make accident insurance the single subject of this article.
Accident insurance, which is the generic name for very many different types of cover, is the youngest of the four main insurance branches; the other three, in order of historical precedence, being marine, fire and life. Its genesis is to be found in the closing stages of this country's industrial revolution, when, with the coming of railways, there was evolved the first simple form of personal acci- dent insurance. Its sole purpose was to provide benefits for rail- way passengers—or, at least, the prudent among them—in respect of injuries or death due to train accidents.
From 1880 onwards, the basic idea of railway passengers' insur- ances, responding to the rapid mechanisation of daily life, was extended to provide cover against all sorts of accidents. And some thirty years later the first personal sickness cover was underwritten as an extension to the standard personal accident policy. Today, a little more than a century since its inception, personal accident premiums paid to the British insurance companies have risen from a few thousand pounds a year to a world-wide annual total in the region of £14 million.
Concurrent with the growth of personal accident business was the development of boiler insurance, which provided certain finan- cial safeguards against the consequences of boiler explosions. Again during the next thirty years or so this blossomed out, into the complex varieties of cover known as 'engineering insurance.' In 1888, for example, there was issued the first policy in respect of a lift and less than six months later the same insurer inaugurated the first lift inspection service. Nowadays nearly every type of engineering insurance automatically includes the provision of a regular inspection service by skilled engineers, who make sure that industrial plant and machinery are both in good working order and safe to use. In this way British insurance over the years has consistently helped to maintain and improve the standard of safety throughout industry.
One of the greatest sources of the rapid expansion of the acci- dent insurance market was the nineteenth-century spirit of social reform as expressed in the Employers' Liability Act of 1880 and the Workmen's Compensation Acts of 1897 and 1906. The essen- tial purpose of the 1880 Act was to allow people in a wide range of categories of work; on suffering injury due to a superintending employee's negligence, to sue their employers in a court of law. In effect, the Act resulted in partial abolition of the previously cast-iron defence of 'common employment,' which doctrine asserted that a workman, by accepting a wage, automatically accepted the hazards arising from the negligence of fellow em- ployees. Confronted with this new statutory risk, the employers ' concerned naturally turned to insurance for suitable indemnities.
A further insurable risk was created by the Act of 1897, which, though applying to certain hazardous occupations only, required employers to compensate their workmen in regard to occupa- tional accidents without proof of negligence. Three years later this Act's provisions were extended to agricultural workers; then, in 1906, the Workmen's Compensation Act of that year made the provisions of the 1897 statute applicable to all workmen earning £250 or less a year. So, through the enactments of government, the greater part of the nation's working population was protected at work by private insurance.
Broadly speaking, this was the position up to 1948, until which time employers' liability insurance was reasonably profitable; insurers had had long experience of the risks involved and so could fix fair rates of premium. However, with the coming into force of compulsory National Insurance in 1948, employers' lia- bility business was confined to indemnifying employers in respect of their common law liabilities to employees. At the same time, the Law Reform (Personal Injuries) Act of 1948 abolished com- pletely the defence of common employment, thereby widening the employer's legal liability to include liability for injury to one employee by the negligence of another and not just by that of a superintending employee. In the new circumstances, insurers could only guess at the, extent to which this increased liability would manifest itself in terms of court actions and awards. As it turned out, they guessed wrong and fixed their premiums far too low. For since 1948 court actions have increased by leaps and bounds, while court awards have often run into five figures. The situation today is that, after six unprofitable years, it is believed that employers' liability insurance is at last showing a more satisfactory trend as a,result of earlier rate increases: But even so, it is already clear from the results for 1954 that, for certain trades, rates of premium have still to attain a satisfactory level.
Just as the beginning of the century witnessed a quickening expansion of employers' liability business, so, to a lesser extent, it witnessed a parallel growth of public liability insurance. Among the first- to take out policies in this new class were contractors and builders. Soon business people generally and, later, private individuals followed their example. Many of the early motor insurance policies were simply public liability cover combined with own accidental damage insurance. By the beginning of the
First World War; however, motor policies were being bvidened in scope and were, in fact, the forerunners of today's comprehensive policies.
Now, motor business is the biggest single class of British acci- dent insurance. Illustrative of its enormous growth over,the years are these private vehicle registration figures: 48,000 in 1909; 110,000 in 1919; 970,000 in 1929; 2,034,000 in 1939; and 3,100,000 in 1954. Altogether, the number of vehicles in use on Britain's roads last year was 5+ million, a fact which gives this country the unenviable distinction of having the highest traffic density in the world. That is one of the reasons why United Kingdom motor insurance during 1954 has once again produced unsatisfactory results. Another is the continuing high cost of third-party awards in court cases involving motor vehicles. Third, and perhaps most important, are the costs of motor-car repairs. As compared with 1938, they have risen by approximately 170 per cent. But in the same period motor insurance premiums have risen by only 30 per cent. Furthermore, such is the construction of the modern car that minor damage to wing or panel usually involves a major repair job. In most cases, too, what has been said about private cars applies with equal force to commercial vehicles. In the cir- cumstances, therefore, it is difficult to see how an increase in motor insurance premiums can be long delayed.
In this connection, incidentally, it is not generally realised that the cost to the motorist of insuring a motor-car in the United Kingdom is cheaper—often very much cheaper—than in almost any other part of the world. To take an example, the London price of comprehensively insuring a certain popular medium- horsepower car, subject to an 'own damage' excess of £10, is £17 6s. 7d. In Melbourne it is £25 19s. 9d.; in Brussels,.£70; in Paris, £83 17s. 6d.; in Montreal, £117; and in New York City, £140.
Nevertheless, despite a number of recent rate increases in certain territories, it is only in the past eighteen months or so that the overseas motor account of British insurance has begun to show a profit over-all. The bulk of the improvement is attribu- table to a return to profitable motor underwriting in the United States for the first time in many years—the United States being our biggest overseas motor insurance market. None of which, however, from the point of view of the United Kingdom market, must be taken to suggest that British motor insurers see the answer to their problems solely in terms of increased rates. That is why they are constantly and energetically supporting the cause of road safety and the work of the Royal Society for the Pre- vention of Accidents. ,indeed, the significance of the road-safety aspect of motor insurance in this country is best realised when it is remembered that in the end motorists pay for. the claims resulting from their negligent driving, and insurers and motorists, therefore, have a common interest in seeing that everything possible is done to prevent accidents.
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