The Appeal of Insurance

Published by EH.NET (May 2011)

Geoffrey Clark, Gregory Anderson, Christian Thomann, and J.-Matthias Graf von der Schulenburg, editors, The Appeal of Insurance. Toronto: University of Toronto Press, 2010. x + 247 pp. $50 (cloth), ISBN: 978-1-4426-4065-8.

Reviewed for EH.Net by Sharon Ann Murphy, Department of History, Providence College.

Perhaps reflecting twenty-first century concerns about risk mitigation, scholarly interest in the history of insurance has been booming of late.? The fruits of a larger conference on the insurance industry, the ten thought-provoking essays that comprise The Appeal of Insurance are certainly a part of this trend.? While editors Geoffrey Clark (State University of New York at Potsdam) and Gregory Anderson (University of Salford) broadly assert in the introduction that insurance ?shap[ed] contemporary economic institutions, techniques of government, mechanisms of social welfare, and patterns of thought,? the essays are all supposed to pivot around the more narrow concept of ?appeal? and its dual meanings of ?attraction? and ?entreaty? (p. 3).? Yet whereas this unifying thread is readily apparent in several of the essays, a few seem out of place in this volume.? Additionally, the thematic, geographic, and temporal scope of the essays are uneven; more than half focus on the British industry, more than half have their main focus on life insurance, and three-quarters are set in the eighteenth or nineteenth centuries.? While this imbalance does not take away from the quality of the individual essays, the volume might have told a more coherent overall story if the editors (who also include Christian Thomann and J.-Matthias Graf von der Schulenburg, both of Leibniz University, Hanover) had attempted to focus on specific insurance lines before the First World War, while casting their geographic net more widely (at least within Europe).? However, I suspect that this imbalance largely reflects the realities of current insurance historiography.

The essays in this volume that fit together best are those which address the lived experience of individuals who solicited insurance in response to a rapidly changing risk environment.? These essays focus on the timing of demand, the language used to understand the risk environment, and the behavior of insured individuals, pushing back against scholars who posit insurance as a purely rational risk-mitigating strategy.? In ?How to Tame Chance: Evolving Languages of Risk, Trust, and Expertise in Eighteenth-Century German Proto-Insurances,? Eve Rosenhaft (University of Liverpool) examines the participants in two eighteenth-century German widows? funds to demonstrate that risk-averse behaviors (such as joining an association to provide for your wife and children upon your death) were not mutually exclusive from risk-taking behaviors (such as trusting that this untested form of association would not fail before your family benefited from its protections).? As the nexus of trust shifted from providence to expert managers over the course of the century, Rosenhaft offers an intriguing argument that while the participants? understanding and expectation of risk evolved, the acquisition of this proto-insurance did not represent a conscious shift towards risk-aversion over risk-taking.

Robin Pearson (University of Hull) comes to a similar conclusion in ?Fire, Property Insurance, and Perceptions of Risk in Eighteenth-Century Britain.?? In complicating the idea that fire insurance was a rational response to the increasing risk of urban fires, Pearson asserts that this industry owed its growth as much to unempirical factors as it did to the emergence of concrete statistical knowledge, stating that people were both concerned ?about measurable risk and unmeasurable uncertainty, fortune and fate, fear and prudence, passion and reason? (p. 85). Most interestingly, he concludes that the risk-reducing strategy of buying fire insurance was not accompanied by other common-sense measures of fire prevention: ?Prudence was no more an outcome of insurance than it was a product of the science of prediction? (p. 98).

These questions of language and the understood conception of risk continue in Geoffrey Clark and Timothy Alborn?s essays, which both grapple with the moral quandary of placing a monetary value on human life.? In ?The Slave?s Appeal: Insurance and the Rise of Commercial Property,? Clark investigates the legal problems surrounding the underwriting of slaves (who were at once life and property) and how similar dilemmas later emerged with speculative life policies and insurance by wives on their husbands.? By ?knit[ting] economic actors together in novel ways … [s]uch socially degrading commercial contracts threatened not only to upend the established social hierarchy, but also to curtail the economic liberty of the self due to husbands, fathers, and masters? (pp. 67-68).? The paradoxical nature of insurance as both a moral good and an instrument of speculation is sustained by Alborn (Lehman College, City University of New York) in ?A Licence to Bet: Life Insurance and the Gambling Act in the British Courts.?? The highly-contested nature of the 1774 Gambling Act, which was intended to eliminate speculative life policies through ?the determination of a boundary between legitimate and illegitimate insurance,? revealed that the ?insurance market … appealed to all social classes because of ? not in spite of ? the fact that it often shaded imperceptibly into gambling? (p. 109).

While these four contributions mesh together extremely well, the second group of essays moves away from the lived experience of insuring individuals and instead focuses on the reciprocal relationship between the insurance industry and the state.? The essay ??The Rules of Prudence?: Political Liberalism and Life Assurance in the Nineteenth Century? by Liz McFall (Open University) serves as a transitional chapter between these two approaches.? While she also concentrates on issues of language, her focus on ?prudence? is not concerned with how this concept was understood by the insuring public. Rather, she is interested in the promotion of this notion by insurance companies, and how ?[n]ineteenth-century life assurance institutions traded their product in a manner that closely mirrored mainstream currents within Victorian liberalism? (p. 145).? For most of the remaining essays, the idea that ?[l]ife assurance was one of those techniques that seemed to spring up to fill the gap between liberal governmental theory in the abstract and the management of concrete social problems? (pp. 145-146) seems a more appropriate unifying motif than the individual experience with insurance.? For example, the essay ?Gottfried Wilhelm Leibniz?s Work on Insurance? by Schulenburg and Thomann is primarily concerned with the assertion by the seventeenth-century scientist and philosopher that ?the government has to install public insurance companies because the welfare of the people is increased if certain risks are securely covered by a public scheme? (p. 44).
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Like McFall, Gregory Anderson?s interesting piece, ?Honesty, Fidelity, and Insurance in Eighteenth- and Nineteenth-Century England,? wrestles with the promotion of an idea through insurance ? this time the notion of fidelity ? and its relationship with governing principles.? As the legal system began to address the emerging problem of white-collar crimes, the insurance industry responded with the creation of fidelity insurance to ?provide protection against acts of dishonesty by trusted employees in public and private companies and by officers of state? (p. 151).? The demands of employers ? and in particular, the state itself who worried about the very real fiscal (and thus political) consequences of white-collar crimes within the growing bureaucratic ranks ? actively shaped the fidelity line. Yet as Anderson reveals, it was always unclear whether this new insurance product actually ?promote[d] commercial stability and security? (p. 160) or rather ?undermine[d] personal morality? (p. 161).
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This interwoven relationship between insurance companies and government actors is likewise apparent in the essays by Martin Lengwiler and Jer?nia Pons Pons.? Arguing in a vein similar to Anderson, Pons Pons (University of Seville) finds in ?Employers and Industrial Accident Insurance in Spain, 1900-1963? that both a constantly shifting legal environment and the demands of a corporate clientele significantly shaped the development of the accident insurance industry in Spain.? Private employers served as an intermediary of sorts between state-sanctioned requirements and the products offered by insurers: ?Although it is true that employers took out insurance due to the responsibilities the new law had recently obliged them to accept, they soon found advantages in the practice of insurance and, above all, in the control of the insurance process? (p. 202).? The greatest fear of both of these actors (the employers and the private companies) was that the state would proactively try to shape the insurance market. They perhaps feared the type of industrial order that Lengwiler (University of Basle) finds in ?Competing Appeals: The Rise of Mixed Welfare Economies in Europe, 1850-1945.? Lengwiler examines the impact of public insurance plans on the growth of the industrial insurance industry in England and Germany, and the health insurance industry in Germany and Switzerland.? Concerned more with institutional decision-making than the response of the insuring public to these competing plans, Lengwiler perceptively concludes that ?the growing appeal of insurance after the late nineteenth century was provided … by the competition and interaction between public and private actors within the insurance market? (p. 173).?
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The final essay of the volume, ?Five Ironies of Insurance? by Aaron Doyle (Carleton University and BI Norwegian School of Management) and the late Richard Ericson (University of Toronto), initially appears to be the biggest outlier of the group, yet is actually the greatest missed opportunity on the part of the editors.? Doyle and Ericson reflect on the insurance industry as a whole from a modern perspective, noting ?fundamental paradoxes or tensions in the insurance institution itself? (p. 227) such as how an industry that initially emerged as a means of spreading risks now groups people into ever-smaller risk pools with dramatically different rate schedules, as well as the ?unforeseen and unintended consequences? (p. 233) of an ostensibly risk-reducing product that in actuality encourages risk-taking behaviors.? Rather than closing the book, Doyle and Ericson?s fascinating essay would have been an ideal framework for the entire volume, effectively demonstrating that the contradictions of the modern insurance industry have their roots in historical realities.? While the concept of ?appeal? only works well for a minority of the chapters, ?irony? captures the essence of the majority.? Thus although The Appeal of Insurance suffers from the weaknesses of most conference compendia , its strengths lie in the quality of its individual parts, each of which reflects a maturing historiography that is ready to grapple with the nuances of this essential industry.

Sharon Ann Murphy is the author of Investing in Life: Insurance in Antebellum America (Johns Hopkins University Press, 2010).? Reflecting her continued interest in the complex interactions between financial institutions and their clientele, her latest project is an investigation of the public perception of commercial banks during the early American republic.

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