It has been exactly 100 years since the pride of the White Star Line, the RMS Titanic, struck an iceberg in the Atlantic Ocean and sank with the loss of over 1,500 lives.
The centenary has prompted many insurance companies on both sides of the Atlantic to publish documents related to the largest maritime loss to date in relative costs, primarily showing their company’s share of paying claims.
When the Titanic sank on April 15, 1912, the Lutine bell was rung at Lloyd’s of London and a very quick claims process was started.
A few months earlier, the ships’ owners, White Star Line, had instructed insurance brokers Willis Faber and Co. to find coverage for the ship’s hull, cargo, contents and personal effects. Willis Faber passed the ‘note’ to his Lloyd’s merchant division where it was appraised and subsequently underwritten by multiple syndicates and insurance underwriters acting on behalf of the members.
The hull of the Titanic was insured for a total loss of $5 million or just over a million pounds sterling at the exchange rate of the time. The policy also included total loss coverage for cargo at $600,000 and contents at $400,000, a value equal to two hundred thousand pounds.
The original brokerage slip that passed through Lloyd’s has been lost, but was photographed and can be seen in Wright and Fayles’ 1928 book called ‘A history of Lloyd’s’. It shows that seven large insurance companies took nearly forty per cent of the risk between them and the other sixty per cent was underwritten by more than seventy people and Lloyd’s ‘Names’.
According to documents recently released by Willis, the marine insurance policy cost White Star £7,500 or $38,000 to insure the Titanic at a rate of 15 shillings per hundred. Modern fares for cruise ships are considerably lower.
The Ship was significantly underinsured at only five-eighths of its replacement cost. This was apparently because the owners thought the hull was unsinkable and were prepared to take the additional risk of $3 million dollars.
Willis states that despite the owners believing the ship to be unsinkable, they had trouble fitting the entire hull deck at Lloyd’s and some forty thousand pounds was underwritten in Germany. There was also a very high franchise or deductible of 15% of the insured value.
Four days after the sinking of the Titanic, the United States Senate held a preliminary investigation at the Waldorf Hotel in New York. The ship’s surviving officers presented their evidence to the panel describing the events of the sinking and signed what is called a ‘protest’ allowing insurance claims to be paid.
Incredibly, White Star was reimbursed for the loss of the hull within seven days of sinking, presumably minus the excess, and paid in full for cargo and contents losses within thirty days.
However, they were underinsured for their third party liability given the value of the people on board. Claims against the company exceeded their coverage by more than $1 million and it remains a mystery whether they had private P&I accident coverage for their personal liability. Suffice it to say that the payments to the families of the missing crew members were negligible.
Claims for loss of persons amounted to more than five times the value of the ship, for those lucky enough to have life insurance policies or purchased traveler’s personal accident coverage. Although there was no dispute about the loss of life, the families had to wait much longer than White Star for compensation.
The ultimate payout for human losses has never been fully affirmed, as more than one hundred and fifty different lives from accident insurance companies were involved in the coverage, on both sides of the Atlantic. American companies took the lion’s share of the claims, due to the many wealthy businessmen and millionaire family members who drowned.
The total loss is estimated to be around $20 million and one of the largest payouts was from Hartford-based Travelers Insurance, which paid out more than $1 million on a life policy.
The sinking of the Titanic also prompted the first and only insurance claim for a car that was hit by an iceberg, by one William Carter, who claimed $5,000 for his 25-horsepower Renault lost at sea.
