Titanic – Part of the history of insurance
With the 100th anniversary of the RMS Titanic hitting an iceberg yesterday and it sinking today with the tragic loss of over 1,500 lives much has been said in the popular press.
What has not been mentioned is the part that insurance and in particular Lloyd’s had in the loss.
The first ship to pick up Titanic’s distress call was the Lloyd’s signal ship at Cape Race. The signal stations were set up in 1901 to help ships detect ‘floating derelicts, ice or other dangers to navigation’.The vessel was insured for £1,000,000 and Lloyd’s paid out the full sum insured within 30 days of the tragedy. To put this into perspective this amounted to just under 15% of the total amount paid out by Lloyd’s on all marine claims in 1912.
An interesting document in my insurance library is a copy of the schedule of co-insurers showing the signatures of the various underwriters concerned and the amount of the risk that they agreed to accept.
Based on a pay-out of £1,000,00o it appears that the White Star Line were grossly under insured.
Interesting to me, was the fact that Insurers continued to trade reinsurance on the Titanic even after she sank; following a message from the Exchange Telegraph in New York saying that Titanic was safe and being towed to Halifax, Nova Scotia.
In addition to the loss of the ship, many passengers were insured. The largest claim to my knowledge was a pay-out to the wife of John B. Thayer, a prominent Philadelphian businessman, who drowned when the Titanic went down – she received US$50,000. It is my understanding it was the largest claim paid out under a life insurance policy to that time. In one of those truth is stranger than fiction episodes Ms Thayer died herself on 32nd anniversary of the death of her husband, that is, 15th April 1944.
With the sinking of the Titanic brought the first ever claim for a car damaged in a collision with an iceberg. William Ernest Carter survived and claimed US$5,000 for his 25 horsepower Renault that went down with the ship.
And finally, for those who like a good conspiracy theory, some believe the Titanic never sank but rather it was her sister-ship the Olympic which had been badly damaged in an maritime collision with the Royal Navy cruiser, HMS Hawke near Southampton accident On September 20, 1911. To scam insurers it has been suggested that the ships were switched and the vessel sunk where it could never be recovered. Like most conspiracy theories I treat this one with a grain of salt.
Interestingly one lady, Violet Jessop, was on board RMS Olympic when it hit the Navy Cruiser. She was also aboard the Titanic and was ordered aboard a life raft and at the last minute a baby was thrown into her arms having been left behind by the parents in the confusion. Both Violet and the baby survived with the mother of the baby rushing up and snatching the baby off Violet when she was rescued by the Cunard ship Carpathia.
Violet Jessop must have been a remarkable woman. These three events did not stop her going to sea and she returned to the Olympic as a stewardess after the war aboard the Olympic. She worked on board ships until she retired in 1950. Another case of truth being stranger than fiction.
But I digress. Back on the subject or risk and insurance. Like many tragedies much good came out of the sinking of the Titanic. First the legislation which had been lagging behind developments in technology required that all ships carry enough life rafts for all passengers and crew. The Britannic for instance had more than enough on board at the time of its sinking. The engine room was split in two so that if one area was flooded the other could continue to operate.
All large cruise ships were required to have at least two radio rooms as a further risk management provision and they were to be manned 24/7 to pick up distress signals. There were ships closer to the Titanic than the Carpathria but there radio rooms were not manned at the time of the incident.
Such measures do not stop large ships sinking as we saw only a few months back on 13 January 2012 with the sinking of the Italian cruise ship Costa Concordia, which at 114,500 gross tonnes, was 2.4 times larger than the Titanic.
Thanks to the lessons learned from the Titanic far fewer lives were lost.
Of course insurance is there again with a expected loss of the ship is insured for €405 million (US523 million).
It shows that we will continue to learn with every single event and that there is still a need for full insurance to the present day.