A Brief History of Risk, Mutual Societies, and How Inland Marine Got Its Name

The concept of performing evaluations of risk pertaining to various behaviors and assigning a dollar value relative to that perceived risk has been around for centuries. How well an insurer determines what to charge for a specific risk and how accurate their assessment is will in turn determine how much (or how little) profit there is to be made. The assessment, or rating, of risk would be done for every industry, and inland marine rating would one day be one of them.

The profit to be made from this practice would be shared among cooperative societies, who long ago would pool their money to reconstruct a building if one of the members’ structures were destroyed by fire, which was one of the most worrisome risks at the time. This practice was the brainchild of some very creative, intelligent men—in fact, the first fire insurance cooperative in the nation was established by none other than Benjamin Franklin.

Across the pond, some English businessmen were also considering the pooling of risk among several of them to lessen the impact of damage or destruction. These men were meeting at a local coffee house known as Lloyd’s, which was the genesis of the venerable establishment, Lloyd’s of London. They decided to insure ships that were crossing the great oceans, as well as the goods that were being carried inside the vessels. This was the beginning of what became known as marine and later, ocean marine insurance.

Fast forward and the application of this coverage expands to include property that is being transported not across the ocean but over inland waterways and by land, via railway or truck—in motion, rather than at a fixed location. While it wasn’t fixed-site property coverage, neither was it the originally named product either—so since the policy was intended to cover property for exposures that could move from place to place, the product was called inland marine, a definition that was initially adopted in 1933, then revised in 1953 and updated again in 1976.

There are several different types of this coverage today, and the amount of premiums that will ultimately be charged to the policyholder will depend on the aggregation of data that goes into inland marine rating processes. Managing general agents, program administrators and carriers can use cutting-edge software these days to automate this process.


photo credit: Derek Keats cc