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Ben Franklin – Insurance Pioneer

Although the idea of insurance has existed for thousands of years and dates all the way back to ancient Greece – when merchants purchased a type of insurance against possible loss of cargo due to bad weather at sea – the insurance industry as we know in the United States today first got its start in Philadelphia in the 1750s.

As a founding member of the Union Fire Company in Philadelphia, Franklin joined with other fire-fighting organizations to form the first fire insurance company in the then-colonies. Members agreed to contribute money to a mutual fund, which would pay out damages for losses to members whose property was damaged by fire.

The insurance company was given the somewhat wordy name: The Philadelphia Contributorship for the Insurance of Houses from Loss of Fire – the fledgling country’s first mutual insurance company. In a time when all homes were lit by candles and oil lamps, fire was a much bigger and more frequent hazard than it is today. A single blaze could quickly devastate a neighborhood.

The First Auto Insurance Policy

Just seven years later, Franklin helped found the first life insurance company. When motor vehicles came on the scene in the late 1800s, auto insurance did not exist. It didn’t take long, however, for accidents to happen.

The country’s first auto insurance policy was issued in 1897 in Dayton, Ohio, when a man paid $1,000 to Travelers Insurance Company for a policy to protect him against liability for injuries or death caused by his vehicle. The policy also paid out in case of property damage to another vehicle. Because motor vehicles were still so new, the policy was actually written as a horse and carriage policy. (Nugent & Bryant, 2024)

I begin with this nod to Ben Frankllin acknowledging that insurance was one of many wonderful ideas he gave to our great country.

The first state to require auto insurance was Massachusetts in 1925, when the state passed a law that required drivers to purchase insurance before registering their vehicles. Other states began to pass similar laws in the following years, and by the 1970s, most states had laws requiring drivers to purchase a minimum amount of liability coverage. 

Today, all states except New Hampshire and Virginia require drivers to have a minimum amount of car insurance. (AI Overview-Wikipedia, 2024

Now for the Story:

                My son owns and operates a towing & recovery business. One of his rollbacks had just completed a long run to the outskirts of Atlanta (about 3 hours away). At 6:00 am Eastern time on the return trip, a drunk driver hit our truck. The driver not only hit our truck but also hit others. The area where our truck was hit was the front fender, severing the brake line. Our driver lost control and went through the guardrail. Fortunately, it had rained earlier that evening and the field beyond the guardrail was muddy, which is what stopped our vehicle before hitting trees.

                Our truck was a total loss. Our driver suffered injuries and was taken by ambulance to the nearest hospital where he was treated and released to return home. He had lacerations and a broken knee cap. After seeing an orthopedic surgeon in his hometown the following day, he was treated and advised that he would be out of work for several weeks.

                As a company we lost our truck and our driver. The good news was that we had worker’s Compensation. But, as you may already have surmised, the drunk driver carried a minimum amount of insurance, causing us to call upon our own insurance company for help.

Purpose of Insurance

Its aim is to reduce financial uncertainty and make accidental loss manageable. It does this substituting payment of a small, known fee—an insurance premium—to a professional insurer in exchange for the assumption of the risk a large loss, and a promise to pay in the event of such a loss. (Insurance Information Institute 2024)

Let me cut to the chase: From the time the accident occurred we begged and pleaded with our own insurance to help. Our initial claim for wrecker services and storage for our own truck was the first hurdle. Our insurance refused to pay anything over $5,000 and (in a very condescending overnight letter) explained that storage would incur and increase daily. I then responded with a very stern phone call that we, too, were a towing business and were familiar with how storage accrued. I am pleased to say that I fought that battle and won, having insurance pay the entire claim for the wrecker bill in full. From that point forward, the claim from one adjuster to another and the value of the truck despite having assessed a value of $83,000 at the inception of the policy and collecting premiums based upon that value was low-balled to $41,000. We turned that down and retained a private valuation firm to dispute their assessment. After seven long months of back and forth we were finally awarded payment for our truck and the search began to replace it. Our driver was released to return to full duty after thirteen weeks, but with three drivers and two trucks, we were forced to downsize, all the while losing revenue.

For those who may be familiar with business insurance, our policy does not cover lost revenue. That afforded them the luxury of dragging this on and on – knowing fully they would not be responsible for compensating us for that time.

The guilty party, however, is on the hook for lost revenue. We were then left with submitting documentation for the past year proving the amount of the loss, only to then be told, “There is more than one party pursuing loss coverage so the $25,000 will be divided up accordingly by percentage.

In total, eight months of exhausting correspondence and being made to feel that we were a colossal imposition to our own insurance provider and theirs, we received the cherry on top, so-to-speak; a cancellation notice!!!  That’s right. A form letter with a box checked off next to REASON FOR CANCELLATION, NONRENEWAL, OR DECLINATION: “Losses exceed company guidelines.”

The critical issue in my mind is: “What are the company guidelines?”  I can well imagine. Any claim against paid premiums goes against company guidelines which are specifically and limited to the taking of premiums – period. Anything beyond that and they are not interested.

I can just imagine how they detest paying anything out. In their view, this was a one-way option: THEIRS. Take the money in and do everything humanly possible to avoid paying any out. What I am stumped on is that it is ILLEGAL to not carry insurance. How many business enterprises can you think of where the customer is breaking the law if they fail to purchase what you are selling? If people don’t carry insurance, they are left having to pay out of pocket for any damage they cause to their own or someone else’s vehicle. Makes sense. I just would like to know (and am submitting this to the Insurance Commissioner), does it come as a complete surprise that an insurance company is going to have to pay claims?

If you think I’m ROARING now, you should have heard me on the phone!!!

References:

Insurance Information Institute iii.org, retrieved from the world wide web on August 25, 2024 from https://www.iii.org/article/insurance-101#:~:text=Purpose%20of%20insurance,-Technically%2C%20the%20basic&text=Its%20aim%20is%20to%20reduce,event%20of%20such%20a%20loss.

Nugent and Bryant, retrieved from the world wide web on August 25, 2024 from https://www.nugentlawyers.com/blog/2016/03/what-does-benjamin-franklin-have-to-do-with-car-insurance

Wikipedia, retrieved from the world wide web on August 25, 2024 from https://en.wikipedia.org/wiki/Vehicle_insurance_in_the_United_States#:~:text=Until%201956%2C%20when%20the%20New,adopted%20a%20compulsory%20insurance%20scheme.