History of the Fire Underwriters Survey

1666 - The Great Fire of London

The Great Fire of 1666 was a catastrophic event that burned for 4 days, consumed 436 acres of the city, and 13,200 houses. The fire was only stopped by destroying buildings in the way of the fire to prevent further spreading. As a result Dr. Nicholas Barbon,a physician and leading builder, proposed the idea of distributing the losses incurred during a fire among a larger group of people. Heeding the harsh lesson imposed on them by the fire, many customers flocked to his firm, known as "The Fire Office", to take advantage of his new service.

Similarly, the New York fire of 1835 caused over $15 million in damages and bankrupted the city’s insurance companies, causing companies to define risk more clearly and to recognize the necessity of improving their financial stability. In 1866, the leading American companies formed the National Board of Underwriters in an effort to introduce some uniformity into the industry. The organization assumed a scientific approach toward the classification of risks and granted local representatives more duties to carry out closer inspections of the important risks. Fire maps came into use at this time.

Growing Pains (1900-1910)

Fire losses rose from $3,905,000 in 1891 to $4,701,000 by 1897. This figure almost doubled in 1900, when losses reached $7,774,000, exhausting an astonishing 93.31 percent of the total revenues collected. Despite the CFUA’s best efforts in encouraging municipalities to increase firefighting equipment, its suggestions often fell on deaf ears. As a last resort, the association increased the rates charged to cities that failed to act on its recommendations.

In response to the problems arising out of the outmoded system. the Canadian Fire Underwriters' Association decided to move toward a more exacting. scientific form of rating. In 1901. the association decided to employ specific

Growth and Prosperity (1920-1930)

At the outset of the 1920s, the association renewed its effort to eliminate the rate and rule infractions which had prevented the smooth operation of the organization. Non-tariff competition was discouraging, but rate cutting and other unfair competition among members themselves was a much more serious matter.

At the 40th annual meeting in 1923, President Alfred Wright assessed the situation: "In the past our anxieties have mainly arisen from without, and all have been successfully surmounted, but now our principal difficulties are from within." Following this meeting, stamping become the new standard which indirectly highlighted a considerable volume of business written by member companies without regard for tariff rates and rules.

Insurance in a War Economy (1940-1950)

The war threw the world into chaos once again, and in the Canadian insurance industry, an immediate and increasing burden was placed on the Canadian Underwriters' Association. It was a time of challenge and the CUA responded by devoting much of its expertise to the war effort. The war brought about a shortage of staff, statistics of the past became useless, and lack of materials. The CUA also offered inspection of plants and other services for free to the government.

At all times, but particularly during the war, the Canadian Underwriters' Association stressed the need to reduce waste. CUA President K. Thorn called on fellow citizens to exercise care, stating that: The annual toll paid by insurance for fire losses and highway accidents is paid by the people of Canada by way of insurance premiums. Insurance premiums go into the cost of production of goods and the cost of services and thus are ultimately absorbed by the people as a whole. In these days of rapidly increasing taxation, in these times of salvage collection, and in a period when governments are going to extremes hitherto undreamed of to prevent inflation, it is not untimely to suggest that the Canadian public exercise a greater degree of care to reduce this terrific waste. (Monetary Times, January 1942.)

The Struggle for Survival (1960-1970)

In 1961 and 1962, the return of profit was accompanied by renewed competition. The competition was so fierce that at times the existence of the Canadian Underwriters’ Association seemed threatened. Despite competition that forced lower rates and increased coverage, the CUA adapted to survive and merged from the market in a relatively strong position. In 1964, the CUA contributed in the formation of the Insurance Bureau of Canada. This Restored something of a sense of cooperation between insurance companies which, in turn, promoted a modest recovery in the latter half of the decade.

The 1980s and Beyond

The first five years of lAO was a success and achieved its major objectives. Stability had returned to the industry and underwriting results did improve. It became clear that the organization would survive and prosper. But storm clouds had already begun to emerge on the horizon. Competition heated up, rate cutting again set in and underwriting results deteriorated. By the early 1980s it was as bad or worse than it ever had been and prices were being cut to the bone. Underwriting results took a nosedive. In 1980 the underwriting loss set a new record at $572 million, more than double the previous record of $283 million established in 1974. 1981 was a shocker. The underwriting loss climbed to $889 million. The only thing that was keeping the industry alive was its investment income. Clearly, corrective measures had to be taken but the insurers that tried to take the lead quickly found their business rapidly fleeing to other markets. Trying to come to grips with the economic upheaval of the early I980s was just one of lAO's major challenges of the new decade. There were many others that the organization - in what had become 'typical' fashion also tackled head on.