Learning How to Construct the Unknown: The Practice of Risk in Early North American Insurance Manuals

Selling insurance against possibly harmful future events became popular among Americans in the late eighteenth century. Among the reasons that more and more people in the former British colonies were drawn to conduct this kind of business was that acting as an insurer required neither formal training nor special equipment. Basically, anyone who was literate and had access to pen and paper could write up a contract that promised some sort of financial compensation for losses or damages to someone, if that person feared a certain event could disrupt his or her comfort and in exchange made a regular payment. Thus, a man named Ephraim Tucker decided in 1793 to issue insurance for “the elegant full-blooded horse Clericus” during its transfer between stables.¹ Philadelphia merchants routinely agreed to insure each other against the so-called dangers of the sea. Churches in New England raised funds to insure the lives of their clergy and the clergymen’s widows and children. Neighbors issued contracts to insure each other’s homes against destruction by fire. Firemen, too, clubbed together to provide financial means for any event that caused one of them to suffer physical harm. The practice of taking on other people’s risks, this shows, was often performed by nonexperts.

Access to literature about the business of insurance and its practices played a central role in improving the chances for self-styled and often inexperienced American insurers to become economically successful. By the late eighteenth century, a great amount of such instructional publications on insurance came from publishers and booksellers in London. The accounts they sold were mostly written by authors with a background in trade or finance, who liked to claim international relevance by incorporating translations of texts from languages other than English. Taking the shape of thick books with up to six hundred pages or of serially published volumes, these writings had in common that they gauged the best practices of insurance by exposing its abuses. Nicholas Magens’s Essay on Insurances (1755), for example, explained “the Nature of the various Kinds of Insurance practiced by the different Commercial States of EUROPE” in view of “their Consistency or Inconsistency with Equity and the Public Good” as well as “divers doubtful Points in making up Accounts of Losses and Averages.” Similarly, John Weskett’s Complete Digest on the Theory, Laws and Practice of Insurance (1780) admonished “the very great DISORDERS which prevail in Affairs of Insurance” to style his account as the groundwork for developing suitable “methods.”² It is, of course, hard to tell the extent to which these publications shaped the practices of American insurers. Their availability in American libraries and archives is often the sole—and certainly unsatisfactory—evidence that someone must have used them.

A look at the instructional literature that American insurers themselves produced helps to fill out the picture. Since the late eighteenth century, various insurance companies printed so-called Instructions that, like the commercial expert literature from Britain, aimed at formalizing the often improvised procedures toward a recognizable standard that defined insurers as a profession, while eliminating both the ignorance and fraudulent tendencies that prevailed among its practitioners. To this end, American insurers fundamentally altered the format in which expertise on risk and guidance on how to insure people against it was delivered. Their instructions were downsized into lightly bound, pocket-sized pamphlets, or just a simple leaflet. This made instructions easy to carry, and constant companions of insurance in practice. Another difference to the lengthy expert elaborations from Britain was that instructions focused on giving a precise description of what an insurer was supposed to be doing, rather than familiarizing the practitioner with insurance’s philosophical, legal, or economic foundations. The intent to shape actions is perhaps most strongly evidenced in the rhetorical strategy of these texts: like letters or personal conversations, they used the personal pronoun “you” to address their readers directly.

A First Book of Instructions for Agents, written by Isaac Perkins in 1819, in his capacity as the first secretary of the Aetna Insurance Company in Hartford, Connecticut, exemplified these characteristics (Figure 1). The book encompassed no more than two dozen pages and was throughout characterized by a high degree of personalization. The opening paragraph, for example, started with “Sir,” and Perkins wrote the name of the agent in question in a blank space that was left for that purpose. The text then explained that “the power, which the Aetna Insurance Company have entrusted to your exercise” was reason to accompany the “commission with the following explanations and directions.” The instructions that followed consisted of two relatively simple and easy-to-understand types of texts. One was a standardized tool kit agents were supposed to routinely integrate into their practice. The tools included a template form for a “survey of buildings” that served to determine whether they were eligible for fire insurance and a list of the fixed premiums Aetna raised if certain items, such as musical instruments, or certain occupants, such as chocolate makers, were in the building. A table of seven “classes of hazards,” defined by the structure’s building materials, also fell into the tool kit category. It was stapled onto the back of the book, and could be folded out when needed (Figure 2). The second type of text offered explanations as to how agents were supposed to amend these hard standards of risk description and price rating in practice. According to it, the accuracy of a survey or the best estimate of a premium remained ultimately the result of the agent’s “candor” and the “judicious application” of “good judgment.”³

What can these instructional booklets and leaflets tell us about the history of risk? Perkins’s instructions seem to indicate that risk cannot easily be reduced to the practice of an abstract, increasingly mathematical calculation of probabilities, which historians often assert was the birthplace of the concept. His instructions certainly contained elements of this story. The “classing” of risks, the method of devising insurance plans based on group features, for example, was among the approaches that eventually defined the discipline of actuary science.⁴ More importantly, however, Perkins’s instructions remind us that risk was always also assessed by the beholder. While comprehensive treatises, essays, and digests certainly achieved a certain standardization of risk perceptions, the little known, highly individualized instructions carried around by early American insurance agents (unavailable on the open market then or in libraries now) figure as an important source type to consider, one created by nonexperts who had been prompted to put expert knowledge into practice.

Elisabeth Engel is a research fellow at the German Historical Institute in Washington, DC.