USA > Massachusetts > Suffolk County > Boston > The memorial history of Boston : including Suffolk County, Massachusetts. 1630-1880, Vol. IV > Part 24
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In the year 1838 the companies first began to make returns of their operations to the State. The law directing these reports to be made was passed by the Legislature of 1837, much to the disgust of the under- writers, who held that it was quite as unfair to call upon them to exhibit to the public the details of their business affairs as it would be to make the same request of individual merchants. These returns were sent for a num- ber of years to the Secretary of State of the Commonwealth, and though crude and imperfect are the only obtainable data of the aggregate experi- ence of insurance companies in this country prior to the current half of the present century. The records of these early years would indicate that the marine business of our Boston companies was fully as large, if not larger, in 1835 than it is at the present time. The fire business, on the contrary, has increased during the last forty-five years not less than three hundred per cent; but the Boston capital invested in this business was considerably larger then than it is now.
But if Boston companies did not extend their operations abroad, they held a fairly firm possession of the home field. At the present day much the larger part of the fire-insurance business in Boston is done by com- panies that have their main offices outside of our municipal limits. and in quite a number of instances in England; but in 1838, when this first report was made, there were only eight or ten New York and Hartford companies that took risks in this city, and these must have had their operations greatly circumscribed.
1
191
RISE AND PROGRESS OF INSURANCE IN BOSTON.
In 1835, by an act of the Legislature, Ebenezer T. Andrew, George Bond, Willard Phillips, and others were made corporators of the New England Mu- tual Life Company. The Hospital Life Company had then been doing busi- ness for twelve years, but had turned its attention more and more to the management of trust estates, so that the field of life insurance in this city was practically unoccupied. It was the intention of the founders of the New Eng- land company to raise the money needed as a guarantee capital, and begin business immediately, but the panic of 1837 coming on before they had completed their plans, it was deemed expedient to abandon the attempt until the financial crisis had passed, so that it was not until 1844 that the company issued its first policy. According to its reports it would appear that not a little misunderstanding existed as to the tax upon the business which would be exacted by the Massachusetts General Hospital, and in. consequence of this some persons were deterred from taking out policies in the new company ; but in time, when the guarantee capital was paid off, it was held that the hospital could no longer collect its annual levy, for as the company was carried 'on upon a strictly mutual plan there were, in the proper acceptation of the term, no profits arising from the business. For this reason the payments were discontinued, the trustees of the hospital and the directors of the Hospital Life agreeing to this construction. The New England Mutual Company started at a time when the experience of under- writers in this country was hardly worth anything as a guide to action. The marine and fire underwriters were repeatedly lowering and raising their rates of premium, in the hope of reaching a satisfactory average; but it was obvious that where a contract was made for life these frequent fluctu- ations could not be indulged in. For this reason the directors of the New England Company believed that their safest course was to establish at the outset a definite line of policy. They had as a guide the Carlisle Table, published in England in 1815, and the "Table showing the Probability of the Duration, the Decrement, and the Expectation of Life in the States of Massachusetts and New Hampshire," prepared by Professor Edward Wig- glesworth, of Harvard University, in 1782, besides the limited experience of the Hospital Life. Taking these, the first work of the directors was to employ Professor Benjamin Peirce, of Cambridge, and James Hayward, Esq., of Boston, to calculate separately the different parts of the table of pre- miums. Probably no company was ever started in which the determination was stronger to establish business upon a scientific basis. Hon. Willard Phillips, for many years the President of the New England Mutual Com- pany, was at the time the highest recognized authority upon insurance law of all kinds in this country; and the annual reports issued by him in his official capacity, as head of this corporation, were received and read every- where as standard treatises on the subject of life insurance, and for many years were used as guides by those starting other companies. At the outset the experience of the New England was somewhat similar to that of the Hos- pital Life Company; that is, the majority of the insured preferred to take
192
THE MEMORIAL HISTORY OF BOSTON.
out policies for a term of years instead of life policies; and it was not until the company had been a number of years in existence that this proportion was reversed, allowing it to enter fully on the life business in the manner as now conducted.
From 1844 to 1854 the marine-insurance business of the Boston com- panies was constantly increasing. During that period came the discovery of gold in California, which gave to the shipping interest of this port an im- petus such as it had never before and has never since received; and by this augmentation of tonnage the insuring companies were able to secure large and favorable contracts. But in 1854 a reaction set in, and in that and in the two following years the losses at sea were enormous. The stock of the companies declined in value, and quite a number of them wholly ceased paying dividends. But during the same time the fire-insurance business had been steadily increasing in volume; though, as the ratio of loss was also enlarged by the growth of the city, the profits to the companies did not ex- ceed a reasonable return on the money invested. The number of companies was not, however, materially increased, experience proving that the profits of the business did not admit of its division among a large number of com- petitors with any degree of satisfaction to those who invested money in these ventures.
With the outbreak of the Civil War the conditions of business were materially changed. The " Alabama," "Florida," and other rebel cruisers, in driving the American commerce from the seas, inflicted a severe blow on the marine companies of this city, and one from which they have never fully recovered. For a time they were able to make good the diminution in regular marine premiums by the returns which they received for taking war risks; but after the war was over the complete measure of their loss was made apparent, for nearly half the ocean tonnage on which they had been called upon to take risks in 1860 had either been sold, destroyed, or con- demned; and the character of maritime business was not promising enough to induce merchants to replace it by newly constructed vessels. As an offset to this, the investments made by the companies during the war, in United States bonds and in the stock of national banks, had been to them a source of exceeding profit, so that in 1865 they were financially in a better condi- tion than they had ever been before, though the outlook for business in the future was not in the least promising. The fire business - and most of the companies took fire as well as marine risks-continued to grow with great steadiness. In 1860 the Boston companies received in fire premiums about $1,300,000; and, as they did but a small agency business at that time out- side of the State, it is fair to estimate their Boston receipts at not less than $800,000. But for a number of years the Boston companies had not been sole possessors of the local field. Year after year companies from other cities had established agencies here, so that in 1860 the number of non- State companies thus represented was fifty-one. The prestige acquired by our local offices was sufficient, however, to make this outside competition
193
RISE AND PROGRESS OF INSURANCE IN BOSTON.
of little moment, for in the year referred to the aggregate premium receipts in Boston of the non-State companies was less than $250,000. By degrees, however, a change took place, and thus in 1866 there were seventy non- State fire and marine companies doing business in our city, and thirty- seven life companies ; while, in 1870, ninety-one fire and marine companies from other States and countries made returns to the State Insurance Com- missioner of their Boston business. But while these non-State companies came in large numbers to our city, the Boston local companies, with the exception of the life institutions, did very little to extend their business abroad. A few of the fire companies entered to a limited extent into the agency field, but the system of scattering risks over a vast area was not popular with our underwriters. The most thoughtful of them never sup- posed for a moment that a fire could occur in Boston of sufficient magnitude to make it impossible for them to pay their losses in full. The home busi- ness was one which they thoroughly understood; and when they compared the experience of their companies with those of other States, they were strengthened in their conviction that the profits in the agency field were altogether too meagre and uncertain to pay for the risk and trouble in- volved in entering it. Two or three of them took risks in Chicago, and the others did at times a small business in some of the cities on the Atlantic seaboard; but with the exception of one company, - the National, - none did what is termed an agency business; and even in this solitary instance the change was an experimental one. In consequence of the confidence reposed in them by the property owners of this city, their business at home was sufficiently large to preclude the necessity of seeking for risks abroad. During the period from 1860 to 1871 these companies paid their stock- holders dividends which averaged higher than fifteen per cent per annum, and at the same time laid up large surpluses; and this was almost wholly due to the fire business, as there was a constant decrease in the volume of marine risks taken, and a disproportionate falling off in the premium re- ceived for assuming these, - a result doubtless due to the keen competition which the steady diminution of the business occasioned.
In 1871 the Chicago fire occurred, causing the sudden bankruptcy of three of the four Boston companies that had ventured to establish agencies there. If this was a warning to owners of property here not to trust too implicitly in the value of indemnity promised by local companies, it was also looked upon by the officers of these institutions as positive evidence that they were sound in their reasoning that an extended agency business could not be carried on with success through a term of years. After this fire quite a number of the merchants of this city divided their risks, so that they might have the guarantees of non-State as well as local companies; but, in spite of this change, the latter still held the larger part of the business.
In November, 1872, the great Boston fire occurred, and, as a natural result of what has just been said, it found our local companies burdened down so heavily with risks that in all but three instances they were wholly VOL. IV .- 25.
.
194
THE MEMORIAL HISTORY OF BOSTON.
incapable of meeting the claims that were presented to them. This fire taught the underwriters and the property-owning classes in this city a very severe lesson. The former were made to. realize that though under favor- able conditions a highly profitable business could be done by confining their attentions to a limited field of operations, yet, in order to avoid the overwhelming loss resulting from a conflagration, it was necessary to be content with smaller profits, and to take isolated risks covering a wide area of territory. On the other hand, the latter were made to perceive that a company that did not practise this system of dissemination was not in great emergencies a safe company to depend upon.
The consequence of this has been that the fire-insurance business in Boston has, during the past eight years, undergone a complete change. In 1860 about two thirds of the risks in this city were protected by policies issued from Boston offices, the companies having agencies here taking the remainder. In 1870 the risks were nearly evenly divided between the two, while in 1880 the non-State companies, numbering one hundred and thirty, were doing more than three fourths of the fire insurance business of Boston. By far the larger proportion of Boston fire underwriters are the agents of non- State companies. A new class of men have sprung up to meet the present demands of the business. Young, active, and progressive, they have in many instances brought with them the results of experience acquired in other cities and States. Forced by the contraction in their local receipts to make good the deficiency elsewhere, the Boston companies have established agencies in hundreds of different places in the Eastern and Western States. The officer of a Boston fire company at the present time is obliged to inform himself as thoroughly of the various hazards connected with the business in St. Louis, Philadelphia, Minneapolis, and San Francisco, as he is to acquaint himself with the risks of his own city. In a like manner the marine com- panies of Boston, having found the local field too narrow for them, have been compelled to appoint agents in the various great centres of commerce. Thus, with the life, fire, and marine insurance companies of this city, the business begun upon a small and contracted scale has gradually spread out until it embraces the larger part of the United States. The companies are still Boston companies, and their officers are still Boston men; but, as ap- plied to them, these terms do not convey the significance which they once did, for many of the pleasing features of the so-called provincialism of the past are fast disappearing.
Some Howes for
CHAPTER VIII.
THE TRADE, COMMERCE, AND NAVIGATION OF BOSTON, 1780-1880.
BY HAMILTON ANDREWS HILL, M.A.
W HEN the struggle between the Colonies and the mother country culminated at length in actual hostilities, Boston was the most flourishing town on the North American continent.1 It had a population estimated by different authorities at from sixteen to eighteen thousand, actively and profitably engaged in various industrial and commercial pur- suits. Its merchants had dealings with Spain, France, Portugal, Holland, the Canaries, and even with Guinea and Madagascar, and many of them had accumulated large wealth. In fact, it was its commerce, and the persistent determination of its citizens that this commerce should be untrammelled in its movement and unconfined in its scope, which during many years had kept it in a state of almost constant antagonism with the authorities at home,2 and which at last, in the month of December, 1773, had led to the destruction of the tea in Boston harbor.3 The Home Government had been determined to break up the contraband trade of the colonial merchants with Holland and her possessions, and to secure the colonial markets for the sup- ply of tea4 to the British East India Company. The risk of seizure for many years had been small, and it is said that not one chest in five hundred of that which was landed in Boston fell into the hands of the officers of the cus- toms.5 The despatch of the tea-ships, and their reception, had indicated that the parties on both sides were now in serious earnest, and that the character of the pending controversy was to be changed from angry correspondence to actual and open warfare. The Port Bill followed, by which Boston was to be punished, humiliated, and, if possible, crushed; and it was executed with a rigor, probably, that went beyond the intentions of its authors.
1 Bancroft's Hist. of the United States, vii. 48. New York, and Massachusetts were the great marts.
2 " The American Revolution was not so much a liberation from political as from com- mercial thraldom." - Hunt's Lives of American Merchants, ii. 390.
8 [See Vol. III. chap. i. - ED.] The value of this article annually consumed in America is esti- mated to have been £300,000, and " nearly the whole quantity was smuggled." Pennsylvania, tion, i. 8, 9.
4 Tea is said to have been first introduced into this country in the year 1721. In 1750 a duty on tea and coffee was laid by the Province, but it was felt to be a burden by the people of the town.
5 Sabine's Loyalists of the American Revolu-
1 96
THE MEMORIAL HISTORY OF BOSTON.
The people of Boston had many gloomy forebodings which were not alto- gether realized ; nor did the war, when it came upon them, bring immediate and utter ruin. As has been said, there was a reserve of wealth to be drawn upon in the time of necessity. During the entire period of the Revolution- ary struggle, and particularly as the seat of war came to be more and more distant, an irregular commerce was carried on, and privateering also, which proved very profitable.1 Mr. Sabine says that during the most distressing periods of the contest useless articles of luxury were imported, and that those who remained at home showed themselves able both to maintain themselves and to provide for those who served in the field.2 Indeed, as has been only too plainly and sadly seen in our own day, the period of war became a period also of luxury and of dissipation. Extravagance in living in the year 1782 would seem to have exceeded anything of the kind pre- viously known in Massachusetts. Samuel Adams, on his return from the meeting of Congress in that year, sought in co-operation with some of his friends to stem the tide of dissipation then carrying all before it; and pub- . lic meetings, at which he presided, were held with this end in view. As his biographer says, he was "far from being a bigoted opponent of innocent pleasures, but he was filled with misgivings at the state of things which then prevailed." 3
But the prevailing prosperity was largely fictitious, - the commercial activity as well as the lavish expenditure being the result of a depreciated currency, which is ever the fruitful source of demoralization and social cor- ruption. The public debt for those times was enormous, the taxes were wellnigh ruinous, and private debts had accumulated fearfully in the effort. to meet the tax payments. In July, 1782, the Tender Act was passed, by which debts were made payable in other property than money, so that executions might be legally satisfied by neat cattle and other enumerated articles. The effect of this, we are told, was to weaken implicit reliance on the inviolability of legal engagements as between debtor and creditor.
With the depreciation of the paper currency, the prices of commodities advanced in more than corresponding ratio. Efforts were made to check the advance, and to maintain an artificial value to the paper obligations of the Commonwealth. At a meeting of merchants and others concerned in trade in Boston, held in Faneuil Hall, June 16, 1779, it was determined that no advance upon any article of merchandise should be made upon the prices then current; that from and after July 15 following, the prices should be as they had been on the previous first day of May; and that after that date there should be a monthly reduction of prices, provided the other towns in the State should adopt similar measures. It was further agreed by the merchants and traders that they would neither buy nor sell silver or
2 Sabine's Loyalists of the American Revolu- tion, i. 144, 145.
8 In a letter to John Scollay, about this time, he wrote : "I love the people of Boston ; I
1 [See Vol. III. pp. 90, 92, 118, 182. - ED.] once thought that city would be the Christian Sparta. But, alas! will men never be free? They will be free no longer than while they re- main virtuous."- Life and Public Services of Samuel Adams, iii. 156-158.
197
THE TRADE, COMMERCE, ETC., OF BOSTON.
gold, that they would not fail to expose any person who, to their knowledge, demanded hard money for goods or rents, and that they would exert them- selves to bring to punishment all offenders against an Act of the State " entituled an Act against Monopoly and Forestalling." One of the reso- lutions adopted was as follows : -
" Resolved, That all those who shall hereafter dare refuse Continental money, or require hard money for rents or any article whatever, shall not remain among us, but be transported to our enemies as unworthy or dangerous members of society." 1
On the 14th of July of the same year a convention was held at Concord, the object of which was stated to be to regulate prices for the purpose of making "the currency stable; " and at another meeting held in Faneuil Hall, August 16, at which Samuel Adams presided, it was resolved, " That all holders and retailers of European wares and merchandise shall, from this time forward, sell all such articles at twenty per cent, or one fifth part, less than the prices at which the same articles were sold in the month of July last, that being the average reduction in the prices of West India goods." 2
But the endeavor to keep down the price of commodities and to keep up the value of the paper promises of the Government, by resolutions adopted in town-meeting or elsewhere, failed signally, as all such endeavors must fail; and the harsher and more violent remedies with reference to those who might demand a full equivalent for their wares were not long persisted in, for in August, 1780, we find various articles of merchandise - English goods, sterling Madeira, Malaga wines, currants, etc. - openly advertised in the papers as for sale by W. & J. Molineux, in State Street, with the announcement that "Hard or paper money, French, Spanish, or Dutch Bills of Exchange," would be received in payment for any of the above goods.3
1 The following are some of the prices at wholesale, fixed at this meeting : Windward rum, £7 Ios. a gallon ; New England rum, £5 8s. a gallon ; molasses, £5 2s. a gallon ; coffee, 18s. a pound ; brown sugar, 65s. to Sos. a cwt .; tea (by the chest), 8s. a pound ; cotton wool (by the bag), 36s. a pound ; German steel, 36s. a pound ; and salt (until July 15), 15s. a bushel. A com- mittee of merchants appointed to carry the action of the meeting into effect consisted of " John Rowe, Esq., chairman; William Cooper, Esq., Deacon Sharpe, Captain Isaac Philips, Colonel Edward Procter, Captain Gustavus Fel- lows, Major Thomas Mellvil, Mr. Henry Pren- tiss, Mr. William Hoskins, Captain Alexander Wilson, Dr. Nathaniel Noyes, Mr. Samuel Ruggels, Captain John Pulling." - Independent Chronicle, June 17, 1779.
2 At this meeting the prices of labor were also fixed.
8 The following table, taken from the Inde-
pendent Chronicle of Oct. 12, 1780, shows the course and extent of the downward movement in the Continental currency : -
Value of Gold and Silver.
Value of Continental Currency.
1777.
January
$100
$105
"
December
100
310
1778.
April
100
400
December
100
634
1779.
February
100
868
"
May
100
1,215
"
September
100
1,800
1780.
January
100
2,934
"
February
100
3,322
"
March
100
3,736
"
April
100
4,000
It was resolved in council in Philadelphia, May 2, 1781, " that the rate of exchange be esti- mated at one hundred and seventy-five Conti- nental dollars for one dollar in specie."
On the 19th of August, 1781, prices of mer- chandise and of labor were again "fixed " at a meeting of free-holders held in Faneuil.Hall.
198
THE MEMORIAL HISTORY OF BOSTON.
In the mean time taxation had been bearing heavily on the people, and there seemed to be no prospect of relief from its pressure. In 1782, and for several subsequent years, the taxes were as high as they had been during the - six years preceding. Besides the immense debt, the annual instalments and interest of which required a large amount of money, and the arrears of old taxes to be collected, Congress was calling continually for the means with which to discharge pressing demands on the United States, and to make partial payments to the officers and soldiers when they should be dis- charged.1 Peace, and the recognition by Great Britain of American inde- pendence, came in the winter of 1782-83, but the burden of public and private debt still remained. The debt of Massachusetts for expenses incurred for its own protection during the war was nearly five millions of dollars, without taking into the estimate its liability to pay the demands of those who held the paper money which had been emitted during the war. The available resources of the State were inadequate to discharge this debt, and for several years the interest had not been paid.2
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