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 relating to the largest maritime loss to date in relative costs, primarily showing their company’s involvement in 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 began.
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 ‘ballot’ to his mercantile division at Lloyd’s where it was assessed and subsequently underwritten by multiple syndicates and insurance underwriters acting on behalf of members.
The Titanic’s hull 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 equivalent 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 ‘A history of Lloyd’s’. It shows that seven large insurance companies carried almost forty per cent of the risk between them and the other sixty per cent was underwritten by more than seventy persons and the Lloyd’s ‘Names’.
According to documents recently released by Willis, the marine insurance policy cost White Star £7500 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 seriously underinsured to a value of 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 $3 million dollar risk.
Willis claims that despite the owners believing the ship to be unsinkable, they had trouble getting the entire hull deck at Lloyd’s and some forty thousand pounds was subscribed for 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 inquiry at the Waldorf Hotel in New York. The ship’s surviving officers presented their evidence to the panel outlining 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 the sinking, presumably less 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 over $1 million and it remains a mystery if they had private P&I accident coverage for their personal liability. Suffice it to say that the payments to the families of the lost 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 were no disputes over 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 asserted, as over one hundred and fifty different lives from accident insurance companies were involved in the coverage, on both sides of the Atlantic. Corporate America 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 for a life policy of more than $1 million.
The sinking of the Titanic also prompted the first and only insurance claim for a car that was struck by an iceberg, by one William Carter, who claimed $5,000 for his 25-horsepower Renault lost at sea.