Insight and Intelligence on the London & International Insurance Markets

25 February 2018

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Icarus

Mark Geoghegan 13 February 2018

Are we in insurance going against the gods?

Are we setting ourselves up in rivalry to the deities?

Do we fly too close to the sun, so that when we occasionally fall hard to earth we feel we deserve the painful thud and crack that comes next?

Perhaps we do.

Insurance always had its roots in protection from earth, wind, fire and water - the most primitive and powerful of the natural forces. When the first man set himself up as protector against these elements was he not suggesting something sacrilegious?

"Forget the sacrifice to the gods, pay me a premium instead and I will see you right," he said.

Who was that brave first customer who took the inaugural but heretical step to put his faith in finance and the law of contract and not in the almighty?

Religions have strained to accept and accommodate insurance for this reason. The more fundamental readings of Islam still do.

But over time insurance has had its best intentions accepted as the central good it has always aimed to be.

In these more secular days, looking after the products of our talents and resources is something even the most scrupulously fatalist theocrat is unlikely to find fault with.

After all, if you have a horse, you tie it up when you make camp. If you don't you can hardly expect the gods to find you a new one every time it runs away in the night.

But just occasionally the industry is able to rouse the moral fury and outrage that its original sin once provoked.

The latest product developments can often bring that first transgression back to the surface. And once disinterred, we can inspect the scene of the moral crime once more in all its gory detail.

Just over a hundred years ago, when insurance became more sophisticated, graduated on from the elements and started to offer protections from the indignities that man inflicts on his fellow man, moral panics were easily stoked.

Cuthbert Heath, hero and patron saint of the modern Lloyd's, provoked Edwardian scandal with the suggestion that theft might be something insurable.

How dare he insure crime? The puritans asked. How could he allow criminals to prosper and place moral hazard in the way of every decent member of the public able to afford a premium? Yet he did and today the idea that theft might be excluded would be utterly ridiculous.

Similar soul searching has accompanied almost all new product developments in the insurance business. Kidnap and ransom was a particularly tough one to swallow in the 1970s when hijackings were so commonplace. Was insurance the vaccine or part of the virus itself?

And still they come.

Just last week a reporter showed me a Lloyd's carrier's proposal form for a policy he had found to cover liabilities arising from corporate sexual misconduct.

In the post-Weinstein world this looked creepy to say the least, particularly when reading a question that asked exactly how many hospitality beds the company was responsible for.

Yet this is what we do. We don't excuse bad behaviour, we clean up after it and try to make it whole again. We coldly analyse the risk and the real causes of loss.

Insurance forces the customer to confront and mitigate the risk under his control.

Heath's theft policy did wonders for the mortice lock industry and cut casual crime rates.

And while it may seem distasteful, there are many companies that will not know they have a possible employment practices problem until an insurer and a broker points it out to them and helps them improve daily practice for the ultimate good of all.

No, forget the gods, we need to formulate stronger and harder wax.

Today's world needs the Icarus of insurance to fly through the sun and beyond.

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This article was published as part of issue February 2018/2

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