Entrepreneurship and Innovation in Automobile Insurance: Samuel P. Black and the Rise of Erie Insurance, 1923-1961

Published by EH.Net (October 2002)

Samuel P. Black, Jr. and John Paul Rossi, Entrepreneurship and Innovation in Automobile Insurance: Samuel P. Black and the Rise of Erie Insurance, 1923-1961. New York and London: Routledge, 2001. vii + 358 pp. $70.00 (hardcover), ISBN: 0-8153-2915-6.

Reviewed for EH.NET by Jeffrey J. Matthews , School of Business and Leadership, University of Puget Sound.

Few industries have attracted more attention from business historians than the transportation field, and histories of automobile manufacturing are especially plentiful. Less well known, however, are the histories of service businesses related to the automotive industry. In their new book, John Paul Rossi and (the late) Samuel P. Black, Jr. work to correct this imbalance by shedding light on innovation and entrepreneurship in the field of automobile insurance. The book is well researched, drawing substantially from corporate archives, interviews with insurance executives, contemporary periodicals, and related secondary literature. Rossi is an associate professor in the history department at Penn State Erie. Black was a prominent Pennsylvania insurance executive who died at the age of 99, shortly after the book’s completion.

Entrepreneurship and Innovation in Automobile Insurance is a peculiar book. At its core, it is Black’s business memoir of his 34-year career (1927-1961) at Erie Insurance, which is currently the twelfth largest automotive insurer in the United States. The book is unusual because one does not begin reading the memoir, or much about Black, until page 64. Black’s first-person narrative spans chapters 3 through 11, while Rossi’s contributions appear to be (it is never made explicit) the contextual introductions to Black’s nine chapters, and all of chapters 1, 2, and 12.

Rossi’s opening chapter is essentially an examination of the scholarly debates over entrepreneurial theory. After the author surveys this “conceptually muddled” field, he establishes his and Black’s theoretical preference to define entrepreneurship as an innovative economic activity distinct from routine business practices, and he concludes that both individuals and organizations can be entrepreneurial. (p. 19)

In the book’s second chapter, Rossi outlines the well-known rise of America’s car culture during the early twentieth century. Between 1913 and 1929, annual car and truck manufacturing increased from a half million vehicles to more than 4.5 million. Along with this spike in production came a precipitous decline in automobile prices and a rapid expansion in road construction, which would have been impossible without federal aid and state management. On the eve of the Great Depression, the author concludes that cars represented “the apex of the industrial revolution.” (p. 38) This achievement, however, did not come without severe societal consequences as automobile accidents increased dramatically. By 1927, annual car-related fatalities exceeded 21,000, and non-fatal injuries were substantially higher. Moreover, from 1919 to 1927, economic losses from auto accidents were estimated at $600 million.

The onset of the automobile culture and its obvious dangers created immense opportunities for enterprising insurance companies. Well-established insurers, including Aetna and Travelers, exploited the automotive market but so did new firms such as Ohio’s Nationwide (formerly Farm Bureau Mutual Automobile Insurance Company), Illinois’s State Farm Mutual Automobile Insurance Company, and Pennsylvania’s Erie Insurance. H.O. Hirt and Ollie Crawford created Erie Insurance in 1924. Three years later, they hired Samuel Black as their claims manager, making him a minority owner in the firm. During his more than three decades at the company, Black also served as a district sales manager, secretary, vice president, and board director.

Organized chronologically, Black’s nine-chapter memoir provides a detailed narrative of his Horatio Alger-like rise in business and his considerable influence on Erie Insurance’s development as a profitable regional insurer. The book provides a unique window into the life of an ambitious corporate salesman and manager, who, at a young age, found professional “romance” in the field of property and casualty insurance. (p. 81) After reading Black’s remembrances, there is little doubt that he was enamored with the insurance business, and that he worked constantly to make Erie Insurance a leader in the industry.

Erie’s continuous success was underwritten in large part by the organization’s commitment to cost control, competitive pricing, and superior customer service. Black worked tirelessly with his firm’s president, H.O. Hirt, to build the company and its enduring corporate culture dedicated to these goals. Through painstaking market research and his extensive managerial experience in sales, claims adjustment, and underwriting, Black developed unrivaled expertise in his field. Perhaps his most significant contributions to Erie’s early success were his dedication to product innovation and market expansion. During his tenure at Erie, the company consistently offered its customers a diverse range of “super standard” insurance policies that provided increased coverage at low prices. (p. 180) Moreover, influenced by his prodding, the company expanded its sales area from Pennsylvania to Maryland, West Virginia, Virginia, and Washington D.C. In those years the company evolved from a start-up concern to having more than $14 million in annual premiums. Although Black left Erie Insurance in 1961 to operate his own insurance agency (Black and Associates), he remained on Erie’s board of directors until 1997. Black’s vision and methods were sustained at Erie long after his departure as an employee.

Entrepreneurship and Innovation in Automobile Insurance achieves its stated objective of illuminating an understudied field of business history. Black’s memoir and Rossi’s chapter introductions and his conclusion provide valuable insights on the strategic and operational developments at a long-lived property and casualty insurer. The authors’ broad theme emphasizing the competitive value of corporate innovation (also called corporate entrepreneurship or intrapreneurship) is both appropriate and effective. Nevertheless, the book possesses noteworthy shortcomings, including glaring weaknesses in writing. Rossi, who generally writes well, indulges all-too frequently in quotation. In his 16-page “Motor Age” chapter there are no fewer than 11 block quotes. Black’s writing is elementary at best and distractingly repetitious. On just two pages, for example, he writes: “very few,” “very conservative,” “very big,” “very much,” “very good,” and “very well,” and his dependency on “a lot” is severe throughout. (pp. 216-17) More problematic was the authors’ decision to have readers wade through two introductory chapters that essentially ignore Black (between pp. 5-50 he is barely mentioned). Rossi’s cogent perspective on entrepreneurial theory (chapter 1) and his subsequent chapter, providing the historical context for Black’s narrative, could have and should have been summarized more succinctly.

Jeffrey J. Matthews is an assistant professor in the School of Business and Leadership at the University of Puget Sound in Washington. He is the author of “Yankee Enterprise: The Houghtons of Massachusetts and the Rise & Fall of ‘Corning Incorporated,’ 1851-1871,” Essays in Economic and Business History 20 (Spring 2002).