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General Questions: History

History - Insurance

What is our nation's oldest property insurance company?

Twenty-four years before Benjamin Franklin helped draft and sign the Declaration of Independence, he started an insurance company!

In 1752 Franklin, his fellow firefighters and several prominent business associates founded The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. The company formed as a mutual insurance company, one in which policyholders would come together to share the risks, modeled after the Amicable Contributionship of London. 

The Contributionship, as it is commonly called, was a proactive insurance carrier that would only provide coverage to houses and other structures that were constructed according to strict building standards. It was the first insurance carrier to enact loss control standards. Even during the British occupation of Philadelphia in 1777, The Contributionship hired a chimney sweep to maintain the chimneys of insured houses that were still occupied. 

The Contributionship was the first successful fire insurance company in the colonies and is still in business today under the name "The Philadelphia Contributionship".  The earliest, but unsuccessful, mutual organization established in the British North American colonies was created in 1735 in Charleston, South Carolina, but was liquidated following a 1740 fire which gutted much of the city's buildings and had left the company unable to recoup the losses.

Unlike today's property insurance policies that are usually written with an annual fixed term for a non-refundable annual premium, the policies sold by The Contributionship were "perpetual".  Perpetual insurance is a type of property policy written to have no term, or date, when the policy expires. From the effective start date, the coverage exists for perpetuity (forever, until cancelled). The insured deposits money, called a "deposit premium", with the insurer to obtain coverage for the life of the risk. The deposit was many times larger than the cost of a non-refundable, annual premium for an equivalent policy with a one-year term. The insurer must earn enough income from investing the deposits to cover losses and operating expenses for the model to be economically viable. Upon cancellation, the insured is entitled to a full refund of the initial deposit premium, usually without interest. This unique perpetual insurance type policy is still sold by The Philiadelpia Contributionship for fire and homeowner's insurance.




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