SESSION 21. Markets created, regulated and destroyed by the State: State action as a driver of private insurance enterprise 1850-1950

21. Markets created, regulated and destroyed by the State: State action as a driver of private insurance enterprise 1850-1950.

Christofer Stadlin (Zurich Insurance Company)
Luca Froelicher (Federal Institute of Technology).


“The business is entirely a creation of law.” That’s how W.A. Dinsdale, in his 1954 History of Accident Insurance in Great Britain, dryly defines the primary feature of interest in the history of employers liability insurance. The law creating this opportunity for private business enterprise was the Employers’ Liability Act of 1880, imposing a liability on employers for accidents to their employees, which did not previously exist. Similar legislation was introduced in various European countries in the second half of the 19th century most notably in Germany but also in Switzerland and France. Everywhere with the same effects: 1. the foundation of private companies offering liability insurance and workmen’ compensation, the other mayor line of business involved; 2. the expansion of existing companies across borders. Even though the market fundamentalist brand of neoliberalism is in retreat, the idea, that it is best for private enterprise and therefore economies if states leave maximum space for individual initiative and interfere as little as possible in private business activity, is still a very forceful underlying assumption lingering around business sciences. The main problem this idea poses for business history and the history of the private insurance in specific lies therein, that it obstructs the view on the very dynamic interdependences between state action, markets and private enterprise, the transformational impact this interdependence had on business enterprises on the one hand and states and state organizations on the other. This interdependence is especially obvious in the history of insurance business.

Session objectives:

The session wants to contribute to a dynamic understanding of the relation between capitalism and state power by looking at the specific history of private liability, collective accident insurance and any other types of insurance similarly dependent on state legislation. It invites papers on the history of such types of insurance, and the history of companies, which underwrote them, but also on the larger socio-political contexts and legal frameworks wherein this took place. Histories about how these companies thrived and throttled on legislative action, creating, regulating and destroying demand for the insurance, they offered, but also how the relevant concepts and political discourses developed and influenced the business.

Three thematic complexes of this interdependence are of special interest in the history of casualty insurance. The elements making them up could therefore also be themselves subjects of research papers, which the session would be happy to accept:

  1. Creating demand.
  2. The development of the concept of liability in the 19th century and national differences.
  3. Liability as a tool of liberal welfare policy, Manchester liberalism’s answer to the social question.
  4. Liability as insurable risk and the problems of negligence and moral hazard.
  5. Insurance funds as means to national financial development.
  6. National legislative projects and initiatives creating opportunity. For private (casualty) insurance, the specific political developments. And the socio-political processes making up the contexts of such. Legislation, national differences and similarities.
  7. Private insurance companies taking on the opportunity; the concrete liability, collective accident or other insurance covers they offered; the development of the companies over time, and how state action changed them as organizations.
  8. Regulating supply. The business model of insurance, selling the promise of future compensation, in case of specific occurrences, is especially prone to abuse and outright fraud. Accordingly, state regulation set in early on, mostly triggered by bankruptcies in the last quarter of the 19th century, which left customers without cover. Maybe the most important area of control was the solvency of insurance companies to guarantee that they could fulfil their obligations to their customers. Second came the control of the actual covers sold to make sure that they really covered the involved risk and were not to the disadvantage of the insured. Of main interest are specific regulations on liability and collective accident insurance. The impact they had on respective insurance companies, and the possible dynamics this triggered. In Switzerland, for example insurance supervision was created in 1886 and interestingly became a marketing argument for Swiss casualty insurance companies especially in foreign markets where regulation was not yet established.
  9. Destroying demand. Germany had been the first European country that introduced business creating liability laws but also became the first country to nationalize collective accident insurance already in 1886. In Switzerland the political discussions about nationalizing workmen’s compensation started in the 1890s, a first vote in 1900 was negative but a second one in 1912 positive and the state monopoly insurance started in 1918. The UK and France followed in 1946 and nationalized workmen’s compensation too. These state interventions made the private casualty insurers lose significant portions of their collective liability business. Especially hard hit were their sales organizations, who lived mostly on commissions. They needed something to substitute for the loss. Existing evidence indicates that the substitute primarily came from other casualty lines mostly private and motor liability. This was facilitated by the fact, that the concept of liability had become commonplace in western societies by the first half of the 20th century.


Paper 1

Fire is a good servant but a bad master: Risk in Insurance Law as a Legal Tool for the State during the Construction of Colonial Canada.

David Gilles (Sherbrooke University)
Sébastien Lanctôt (Sherbrooke University)

The fundamental principle of insurance is the pooling of risks. While types of insurance vary widely, their primary goal is to allocate the risks of a loss from the individual to a greater number of people. Each individual pays a «premium» into a pool, from which losses are paid out. Regardless of whether the particular individual suffers the loss or not, the premium is not refundable. Insurance companies are the safe keepers of the premiums. Because of its importance in maintaining economic stability, the government and the courts are very strict in ensuring these companies are regulated and act fairly with consumers. At the beginning of North American insurance, in the early eighteenth century, all contracts were issued in England. Fire was the primary risk in the 1800s and early 1900s. As new risks were added and interest in protecting against these risks increased, new policies were proposed. The insurers that began to operate in Canada at the beginning of the 19th century were mostly English, although others were American and pre-Canadians. The development of damage and personal insurance contracts should be seen in the context of the general development of other forms of commercial enterprises that took place during the early nineteenth century.
The success of the English ventures and the legal weakness of their monopoly encouraged other companies from America to enter the same market. The fire risk follows the development of the Canadian State. Some of these insurance companies collapsed because they failed to evaluate the risk of fire properly. While the State intervened minimally during the first half of the nineteenth century, Provinces and the Federal State adopted legal structures to promote Canadian insurance companies, and mitigated fire risk during the second half of the century. During the same period, and because of the lack of regulation by provincial governments between 1800 and 1867, insurers themselves had to find forms of self-control to ensure a degree of stability in their operations. As a transnational perspective, various fire insurance boards were set up under the Dominion Board of Fire Underwriters, which later became the Insurers’ Technical Group. The objective was to compile the technical results, establish rules for prevention and determine the tariffs. In 1857, a similar organization was set up in Halifax by the Island’s insurers, followed by the Nova Scotia Board of Fire Underwriters, established in 1864, the first provincial body in Canada for control and pricing. All provinces later followed, grouped under the famous Canadian Underwriters Association. The Federal State and the provinces had to insert this legal private system in the general common law system through a number of laws. In 1910, the first major regulation of the insurance sector took place with the enactment of the Insurance Act. It had its origin in legislation of Old Canada existent at the time of the Confederation. The object of the Act is to require companies and persons engaged in carrying on the business of insurance to provide security for the performance of their obligations. This Act, in its section 4, operates to prohibit an insurance company incorporated by a foreign state from carrying on its business within Canada if it does not hold a license from the Minister under the said Act and if such carrying on of the business is confined to a single province. But for the Supreme Court of Canada’s Justices in a 1913 decision, section 4 of the Insurance Act is “ultra vires and section 70, which imposes a penalty on those that would carry on the business of insurance without taking that license is also illegal”. This decision emphasizes the boundaries of the governments’ intervention spectrum.


Paper 2

Managing crisis. Insurance regulators and companies in the US and Switzerland 1930-1935.

Luca Frölicher (Federal Institute of Technology)

In my paper I will show how the State personified in Insurance regulators have preserved the insurance market from serious economic shocks in the 1930s. Thereby I will focus on emergency action by regulative bodies to secure public trust in private insurance companies between 1931 and 1935 in the U.S. and Switzerland. Based on newly discovered archival material I show how the regulators took action to facilitate financial reporting at times of depressed asset prices, therefore leaving usual market-to-value paradigm. Without these easing of financial reporting standards quite many insurance companies would have been in serious troubles. Furthermore I will explore the discussions taking place in regulatory authorities on this deviation from the usual practice.


Paper 3

Riding on the waves of legislation. The experience of the Zurich General Accident and Liability Insurance Company Ltd. 1872-1950.

Christofer Stadlin (Corporate Archives, Zurich Insurance Company Ltd.)

With the second industrial revolution literally taking ever more steam and the rising of the bourgeois middle and the working classes the general perception of risk changed profoundly around 1850. Especially of the risks directly tied to industrial development and technological innovation. The newspapers were full of reports on railway accidents. People falling off or under trains, train crashes with multiple deaths and injuries. The ever more intensive industrial production let to more accidents on the factory floors too. These kinds of accidents and their potentially devastating effects on the involved individuals and their relatives were ever less seen and accepted as inevitable tribute to divine will or destiny but as the profane consequences of technological progress and of machines, owned and exploited by specific interests. This led to the rise of the concept of liability: The idea that the owner of the machines and installations had a responsibility in regard to their unwelcome effects and therefore an obligation to compensate for the material damage caused by accidents happening on and around them. The rising nation states started more and more to take up the concept of liability, also under the pressure from the worker movements. Sooner or later most of them did cast liability into legislation making industries, especially the ones seen as accident prone like mines, railways, steel and textile mills etc. liable towards their workforces and third parties in case of accidents happening in or around their premises. By this process liability turned into a financial risk for the owners of respective industrial firms.

This paper will show how legislative state acts in the 19th and first half of the 20th century created and destroyed business opportunities for accident and liability insurance, the dynamic processes leading to this, how private actors acted and reacted and how they interoperated with states. It will do this by looking at the history of the “Zürich” General Accident & Liability Insurance Company Ltd. from its foundation in 1872 to 1950. In a first part the development of the concept of liability and the introduction of respective legislation in various western European nation states, where Zurich was active, will be traced. In a second step the effects this had on the company will be explored, how it perceived these developments and above all, how it acted on the business opportunities they created. Thirdly nationalizations impacting Zurich will come into focus. Again it will be looked at how the company reacted and acted on these changes which – at least at first sight – seemed to be quite dramatic. Overall special interest will be placed on direct interaction of the company with state actors like legislative and regulatory bodies.