The History of New York State
Editor, Dr. James Sullivan
Online Edition by Holice, Deb & Pam
Marine insurance was the first form in which insurance appeared in New York, just as it was the first and only form of insurance developed by the men of the ancient world who went "down to the sea in ships." It is an interesting phase of our records of discovery that the Latin counties not only assembled the machinery and personnel of America's discovery, but to one of them must be ascribed the credit of introducing the "polizza" or policy of insurance developed by Italian mariners of the thirteenth century.
In colonial days the American merchant traders obtained insurance on their cargoes from London underwriters in Lombard Street, where the Italians had left their name. In the same manner that the great business of Lloyd's originated in the gathering of shippers at Thomas Lloyd's Tavern, so in old New York the first insurance office was the Tontine Coffee House. It was to this rendezvous that a man whose fortunes were tossing on the sea in quaint sailing vessels came, in 1759 and later, to ask some citizen to underwrite them personally. At that time any hazard was underwritten at any rate acceptable to the two men making the contract. These early marine policies always stated that they were "as good and binding as if made in Lombard Street." The ancestors of the shipping firms that built up the American Merchant marine in the first half of the nineteenth century were accustomed to seek insurance on their seaworthy ships against "the perils of the sea," and "violence at the hand of man." By "perils of the sea" was meant all disasters due to the elements." Violence at the hand of man" included attacks by pirates and men-of-war; the barratry of master and mariners, and "arrest, restraint and detainment of all Kings," which meant embargoes, a weapon of war employed by the European powers in their dynastic and economic rivalries.
Early Insurance Notice.--An interesting exhibit of the early regulations developed for the issuance of marine insurance is given in a notice of the New York Insurance Company, which appeared in the tiny New York City Directory of 1796. This company was the first regularly organized corporation for underwriting shipping. The notice is as follows:
THE NEW YORK INSURANCE COMPANY
John Broome, John H. Thompson, John Blagge, Joshua Sands, Henry Huntington, William Neilson, George Barnwell, John P. Mumford, David M. Clarkson, James Scott, Francis Childs, Moses Rogers, Lewis H. Guerlain, Ebenezer Stevens, David Smith, George Ludlow, William Denning, Wynant Van Zandt, Samuel Ward, Edmund Scamon
DANIEL PHOENIX, SECRETARY.
RULES TO BE OBSERVED
The office is open from nine o'clock in the morning to two in the afternoon, and from four to eight in the evening--Sundays, Christmas-day, Public-fasts, and Thanksgiving day, the first of January and the fourth of July excepted..
Application for insurance must be made in writing.
Credit will be given for Premiums exceeding the sum of thirty dollars, upon receiving approved notes for the amount for the following periods.
Upon all coasting or West-India voyages. Six months.
Upon all European or African voyages, Nine months. Upon all Insurance upon time, the term of the Insurance losses to be paid in thirty days after proof thereof, the amount of the note for the premium if unpaid being first deducted.
All policies of Insurance will be signed by the President and attested to by the Secretary.
Early Fire insurance Companies.--The New York Insurance Company was soon called upon to share its field with other regular companies, among then the Marine Insurance Company, incorporated in 1802; the Commercial Insurance Company, 1804; the Ocean Insurance Company, 1810; the American & National Insurance Company, 1812; and the Pacific Insurance Co., 1815. Each of these companies was organized with a capital of $500,000 and chartered by the State Legislature.
Fire insurance reached the incorporated stage before marine insurance. Alexander Hamilton, or Colonel Hamilton, as they called him, the distinguished lawyer and citizen of New York, was consulted on many of the private financial enterprises of his day. He drew up, in 1787, a deed for an insurance company. John Pintard was one of the leaders in this new company, Twenty-two years later he put his enthusiastic spirit into the first savings bank. The other citizens interested were: Thomas Eddy, an Irishman and a Quaker, and one of the best known Tontine Coffee House insurance brokers; Samuel Bowne, a famous out-of-door underwater; William Laight, William Bayard, Daniel Phoenix, Cornelius Ray, who later became president of the Branch Bank of the United States; George Stanton, Comfort Sands, Andrew von Tuyl, Peter Allaire, Anthony L. Bleeker, Guilian Verplanck, William Minturn, the famous merchant shipper; John Murray, who owned the gold fish pond region now known as the Murray Hill section; Robert Lenox, alter reputed to be the wealthiest man in the city and John McVicker Their company was named the Mutual Fire Insurance Company of New York. Their first office was at 57 King Street, now Pine Street. They undertook to insure no buildings more than two miles from the City hall, then located on Wall Street. Gilt numbers bearing the insignia of the company were placed on every house they insured up to 1809. The volume of business accomplished by this pioneer company between 1809 and 1835 is told in the figures reached by the latter year when the great fire occurred. The Mutual Assurance Company of New York has paid out on losses to the amount of $1,005,000. So sound was the credit of the company that when the great fire made it insolvent, it was able to reorganize in the following year. In 1851 it took the name of the Knickerbocker Fire Insurance Company to distinguish it from several of the newer companies who used the word "Mutual" in their titles to define the principle of their business. The Mutual Assurance Company was followed by the Washington Insurance Company, instituted in 1801; the Eagle Fire Insurance Company, incorporated in 1806; the Phoenix Insurance Company, 1807; the New York Firemen's Insurance Company, 1810; and the Globe Insurance Company, 1814. By 1819 there were eight fire insurance companies in New York that had been carrying on a costly experimentation with their individual rates. Then the leaders of these rival companies organized themselves for cooperation under the vivid name of The Salamanders Society. "The Salamanders" existed until 1826, and were the forerunners of the National board of Underwriters. Their attempt at uniform rates was not wholly successful. By 1826 the number of fire insurance companies in the city has increased to twenty-six, principally engaging the interest of the same enterprising citizens whose names were connected with the early banks. In the early day of insurance the offices were often located in private homes, and each has it great iron chest as a symbol of security. It was the custom to serve crackers and cheese to clerks and clients during business hours.
After 1822, the year when the insurance offices migrated to Greenwich Village, along with the banks, to escape the yellow fever, the rapid growth of insurance was due to the opening of the Erie Canal, which developed a new type of policy on inland navigation. Many of the marine companies had begun early to hand fire insurance. The one foreign company doing business in the city, the Phoenix Fire Insurance Company of London, was legislated out of the field as a war measure in 1814, but was later reinstated upon the cessation of hostilities. The great fire of 1835 destroyed $13,000,000 worth of property in the business section of New York. The catastrophe came to the city on December 126 and 127, destroying 6584 stores. To save property the city government resorted to explosives. The terrible fire ended the first era of New York's insurance history, and twenty-three of the twenty-six fire insurance companies were ruined. The city came to the relief of their patrons by offering them fire loan stock. Two years later there were twenty-one active fire insurance organizations in the field, all engaged in carrying on a rate against each other.
Life Insurance Business.--The first life insurance policies in New York City were issued by marine and fire insurance companies and by trust companies. Among the companies doing a life insurance business along with fire risks, or management of estate, were: The Merchants' Insurance Company, organized in 1818; the Union Insurance Company, organized in 1819, and the New York Life Insurance and Trust Company, chartered in 1830. The latter company issued in the first year of its existence 1,821 life policies. At that time life insurance was issued for short period and under very rigid restrictions. Absolute forfeiture resulted from nay one of the following causes:
(1) the non-payment of any premium; (2) death by the insured's own hands; (3) any untrue statement in the application ; (4) death upon high seas; (5) death in consequence of a duel; (6) death by the hands of Justice; (7) death in the know violation of any law of the Untied States, or any State or Province where in residence and travel were permitted; (8) residence or travel south of the southern boundaries of Virginia and Kentucky, between July 1 and November 1, or any time beyond the settled limits of the United States and the British provinces of Canada, Nova Scotia and New Brunswick; (9) military or naval service, the militia not in actual service excepted.
The growth of the Mutual's service as constant until in 1923 it could look back upon a record of $424,544,763, paid in dividends to policy-holders, a sum surpassing by millions the dividends paid by any other competitor' $789,219,121 in death claims, and $212,102,241 in matured endowments. These figures measure only impersonally the work of the men whose energies and wisdom have developed the great insurance business which has long covered every State in the Union and many foreign offices.
Charles A. Peabody, president of the Mutual in 1924, had been head of the company since 1905. His place has now been taken by David Houston.
New York Life.--The New York Life Insurance Company was originally called the Nautilus Insurance Company. Its business was carefully organized between 1841 and 1845, when it began the life of service that has earned for it the title of the "Old Reliable." The men who raised the capital for the new company were: Caleb S. Woodhull, Herman W. Childs, William V. Grady, Joseph B. Nomes, Addison Dougherty, and D. H. Cushman. Forty-six of the fifty-six subscribers took out policies in the company, the affairs of which were directed for the first three years of its history by James de Peyster Ogden. The first actuary of the company was Pliny Freeman. The original office of the Nautilus Company was at 58 Wall Street, where, in the first years of it activity, it issued 449 policies, and had the fortunate record of no loss by a death of a policy holder. The limitation of insurance on a life was fixed at $5,000. The restrictions common to all early insurance contracts were at first enforced, but in 1850, suicide and death at sea as causes of forfeiture were removed, and in 1855, the limitations on traveling were discontinued.
The original charter received from the New York State Legislature in 1841 had permitted the company to do a fire, marine and inland navigation insurance; but in 1849 the business was limited to life insurance and the name of the company changed to the New York Life Insurance Company. During the year prior to this the young business had come under the direction of another president, Morris Franklin, who for thirty-seven years endowed the company with his financial wisdom, large humanity of outlook and hard work.
A single policy of the many issued by the nautilus Company during its first year of activity is strangely indicative of the widely diversified character of its business. Philip Swan was a Negro slave whom his Virginia master had insured and who demise was the first of the company's death losses. The company that insured Philip was destined also t issue policies upon the lives of men in almost every walk of life from the obscure slave to presidents of United States, Cluster, Sewards, and others, great and small.
During the Civil War, the New York Life Insurance Company was faced with the problem of what course to follow in its contracts with Southern policy-holders. The company's agents in the South, where a large business had been developed, endeavored to carry out all the company's obligations until in August, 1861, the government forbade commercial negotiations with citizens of the seceded States. Many of the policies of the company therefore lapsed, but, in its spirit of humanity, no settlement was refused to a Southern client when the deceased had not actually taken up arms against the Federal Government. In 1872 the New York Life Insurance Company put into practice the Tontine principle, which shortly became a matter of technical controversy in the insurance world of New York. In 1873-74, when eleven New York insurance companies went into the hands of receivers, the New York Life Insurance Company safely weathered the trying years, induced by the great panic of 1873.
President Morris' successor in 1885 was William H. Beers, whose life work as also bound up with the company's progress. He was followed in 1892 by John G. McCall, who for sixteen years had been chief examiner of the State Department of Insurance. In 1907 Darwin P. Kingsley assumed the presidency of the company.
The Equitable.--For the first year after the Equitable Life Insurance society was organized in 1859, its five officers did the routine office work and personally canvassed all the policies. Their one employee was the office boy at $1.50 a week. The dominating spirit of the new company was Henry Baldwin Hyde, its young vice-president. He had left the cashiership of the Mutual Life Insurance Company in order to create another insurance company for which he belied there was room in New York. He was then only twenty-five years old. Fifty-two representatives of New York business life were the charter directors of the Equitable, which took its name from the older London institution William P. Alexander, a prominent lawyer of long service in public life, was the first president. George W. Phillips, an insurance expert, became the first actuary of the company, Dr. Edward M. Lambert was the examining physician, and Dr. Willard Parker was engaged as consultant. The capital upon which the little company began its corporate life was $100,000, and by the end of the first year they had written policies amounting to $1,144,000 in outstanding insurance. One of the alert young vice-president's first activities was to insure all of the Board of Directors, and thus win the confidence of the public in his company. So carefully were risks assumed that after the Equitable had been writing insurance a year and a half only three deaths had occurred among its members. Mr. Hyde, who lived to become president of the Equitable, used to say there were but two persons who united with him in organizing the company who sincerely believed their enterprise would be a permanent success. They were the first president, Mr. Alexander and the vice-president's father, Henry H. Hyde.
The spirit of competition which sharpened the activities of all the New York insurance companies from the beginning was manifested in the early history of the Equitable. It was the dramatic determination of the young man whom the Mutual Life Insurance Company had dropped from its staff, when he expressed the ambition to found another life insurance company, to open his own office in the same building with his old company, but above them, and under a larger sign. The personal feeling between the executive heads of the two companies was later healed but the organizations developed in a friendly spirit. Mr. Hyde continued to direct the great institution he had founded until his death in 1899. Its territory in time covered every State in the Union but Texas, and it has established offices in every large European capital. William H. Day became president of the Equitable in 1911. In 1923 its assets were $686,944,357.27.
When fire destroyed the interior of the home office of the Equitable in 1912, the company accomplished the difficult task of continuing its business in temporary quarters even during the day when the flames were consuming much of the company's precious historical material. On the site of the old building at 120 Broadway there was erected the most valuable office building in New York.
Code for Insurance Finance.--Between 1863 and 1870 the life insurance business in New York experienced rapid growth. The next decade, however, witnessed a decided reversal of interest, due largely to ignorance of life insurance as experimented upon by younger companies; so that between 1870 and 1889 a period of depression took all except two of the New York companies organized after 1860 out of the field. The Metropolitan Life Insurance Company was one of the New York companies which continued to survive and flourish.
The steady growth of life insurance in the last decade of the nineteenth century indicated a great accumulation of capital amassed by the leading institutions. At the same time the trust company business was growing quite as rapidly. An innovation on insurance management was undertaken when the cash assets of the great insurance companies began to flow into the trust companies' coffers for investment in railroad and industrial projects planned on a gigantic scale. Trust companies became subsidiary interest of the insurance companies, and insurance companies found themselves doing a banking business and performing syndicate operations.
The Armstrong investigation, which was conducted in 1905 by the New York State Senate, with Charles Evans Hughes as counsel, brought these condition to light, and revealed that the conservative principles of the insurance business had been demoralized by the speculative spirit which had taken possession of the big companies. As a result of the investigation which lasted from September top December, 1905, and brought all of the New York leaders of insurance to the stand, the insurance companies were prohibited from speculating in stocks, and from further continuance of the deferred dividend or the Tontine principle. A standard code for insurance finance, formulated by the Insurance Act of 1906, is now generally followed.
The influenza of 1918 was a greater blow to the insurance business than any war. The fatalities of that world-wide sickness cost each of the long-established insurance companies in New York millions of dollars. The World War did not drastically affect the mortality rate of the insurance business. Experience shows that war takes the young and vigorous, who have not yet insured the lives they give to their country.
The oldest existing New York fire corporation, organized in 1811, is the Albany Insurance Company. The practice of insurance was already well begun when the American colonists seized the reins of government and formed the United States. With a broad continent to settle and unlimited resources to develop at considerable individual risk, property and life insurance met very essential needs and both the science and practice of insurance grew, so that in time America became the best insured par of the globe. New York having become the commercial centre of the New World it was natural that insurance should centre largely in the State. The considerable development had already taken place, as has been noted, in 1850, when the State Insurance Department was established to supervise these interests more closely then was possible before while classed as simple moneyed corporations and, under an act of 1831, making brief yearly statements to the State Comptroller.
Fire Insurance Business.--As a response to the long need for cooperation among writers of fire insurance, the national board of Fire Underwriters was finally organized in 1866. This board, made up of representatives of fire insurance companies, is a purely helpful organization with legislative powers of control over the fire insurance business. Through its committees of experts it has accomplished much valuable service for the public good. Its committee on fire Prevention, which has been active since 1892, has made a scientific study of engineering standards of fire prevention in American cities throughout the country. Its Committee on Laws is inconstant touch with the legislative requirements for fire protection. Its Public Relations committee carries on a campaign against the kinds of carelessness that causes fires. The Board of Underwriters has maintained a special fund for awards in the conviction of incendiaries. It conducts two remarkable laboratories, one in Chicago, and one in New York, in which the process and supplies relative to fire hazard are tested. During the World War the safeguarding of all the cantonments, naval properties, and munitions plants against fire hazards was accomplished by the government through the expert advice and constant cooperation of the personnel of the National Board of fire Underwriters. The headquarters of this great clearing house of safety is at 76 William Street.
Development in Insurance.--The original three lines of fire, marine and life insurance have developed into five principal lines and the miscellaneous or casualty line embraces a variety of risks--personal accidents and health, fidelity and surety bonds, steam boiler, credit, employers' liability, plate glass, burglary and theft, vehicle, property damage, live stock and workmen's compensation. Several new divisions have also been added to fire and life insurance, and many fire corporations carry hail and windstorm, sprinkler leakage, tourists' baggage, registered mail, motor vehicle, and explosion risks.
The total of 203 companies authorized in 1859 has grown to 702 and is increasing each year. As all the large insurance corporations are represented in New York, the aggregate of figures given out by the New York Insurance Report, included the growth of the business in the United States.
In less than sixty years the amount of fire protection increased from something over one and one-half billions to nearly eighty billions of dollars; marine, from one hundred and fifty millions to over three billions; life, from one hundred and fifty millions to nearly thirty billions; the more than six and one-half billions of casualty protection is entirely new; while the amount of insurance in force under title and mortgage guaranty cannot be shown.
In a similar way the assets of fire corporations grew from less than fifty-eight millions to nearly nine hundred and ten millions; marine, from less than twenty-one to nearly eighty-one millions; from twenty-six and one-half millions to over five and one-half billions; while the new lines--casualty and guaranty--have the accumulations already given.
The total disbursements for fire lines rose form eighteen millions to over five hundred millions; marine, from nine and one-half to over ninety millions; life, from two and three-fourths to over eight hundred and fifty millions; and the new lines are as stated.
The total income from fire lines rose from twenty-six millions o over five hundred and twenty-five millions; marine from less then fourteen to nearly one hundred and fifty-seven millions; life, from five and one-half millions to one billion; and the new lines are as stated.
State Supervision of Insurance.--In 1925 the insurance department of New York issued its sixty-sixth annual report. The number indicated that, of the numerous agencies of the State government, it was among neither the oldest nor the youngest established by the State of New York for the control of public affairs since assuming independence. The department's story shows, however, that it has grown to be one of the largest and most important of the State agencies.
The History of New York State, Lewis Historical Publishing Company, Inc., 1927
This book is owned by Pam Rietsch and is a part of the Mardos Memorial Library
Transcribed by Holice B. Young
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