Hostname: page-component-cd9895bd7-gxg78 Total loading time: 0 Render date: 2024-12-25T05:04:17.911Z Has data issue: false hasContentIssue false
  • English
  • Français

British Fire Insurers in Australia, 1860–1920: A Story of Enterprise, Luck, and Resilience

Published online by Cambridge University Press:  25 November 2020

Monica Keneley
Get access Rights & Permissions [Opens in a new window]

Abstract

The global expansion of British insurers in the nineteenth century has been a feature of insurance history that has highlighted the strategic nature of the multinational enterprise (MNE). The growth of the Australian colonies from the mid-nineteenth century attracted the interest of these overseas insurers. This article considers the challenges these firms faced and the way in which these trials were overcome. Effective networks were important in establishing a market presence in the Australian colonies. A combination of enterprise, luck, and resilience assisted in building these links. The experience of British insurers in the colonies sheds light on the processes of MNE expansion into markets beyond their range of tacit knowledge and expertise.

Keywords

multinational enterprisesMNEinsurance companiesAustraliainternationalizationforeign market networks
Type
Research Article
Information
Business History Review , Volume 94 , Issue 3 , Autumn 2020 , pp. 535 - 568
Copyright
Copyright © The President and Fellows of Harvard College 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

The author wishes to acknowledge the suggestions made by David Merrett, Geoff Jones, Mira Wilkins, and the anonymous referees of this journal on earlier versions of this article as well as the generosity of Dr. Garry Pursell in making available his extensive card index, which has enabled the identification of British insurers in Australia in the nineteenth century.

References

1 Wilkins, Mira, “Multinational Enterprise in Insurance: An Historical Overview,” Business History 51, no. 3 (2009): 334–63CrossRefGoogle Scholar.

2 Pearson, Robin, Insuring the Industrial Revolution: Fire Insurance in Great Britain, 1700–1850 (Aldershot, 2004)Google Scholar.

3 Pearson, Robin and Lönnborg, Mikael, “Regulatory Regimes and Multinational Insurers before 1914,” Business History Review 82, no. 1 (2008): 61–62CrossRefGoogle Scholar.

4 Raynes, Harold E., A History of British Insurance (London, 1950), 266–70Google Scholar.

5 Clive Trebilcock, Phoenix Assurance and the Development of British Insurance, vol. 2, The Era of the Insurance Giants, 1870–1984 (Cambridge, U.K., 2000), 191.

6 The Fire Offices Committee was the cartel body that administered British insurance tariffs. Westall, Oliver, “Marketing Strategy and the Competitive Structure of British General Insurance, 1720–1980,” Business History 36, no. 2 (1994): 27CrossRefGoogle Scholar.

7 Keneley, Monica, “The Service Economy,” in The Cambridge Economic History of Australia, ed. Ville, Simon and Withers, Glenn (Port Melbourne, 2015), 373–94Google Scholar.

8 McLean, Ian W., “Australian Economic Growth in Historical Perspective,” Economic Record 80, no. 250 (2004): 332CrossRefGoogle Scholar.

9 Simon Ville, “Colonial Enterprise,” in Ville and Withers, Cambridge Economic History of Australia, 205–7.

10 Ville, “Colonial Enterprise,” 213.

11 David Merrett and Simon Ville, “International Business on the Eve of World War One: Revisiting the Size and Scope of Foreign Investment in Australia” (paper presented at the World Economic History Congress [WEHC], MIT, Boston, 2 Aug. 2018), 7

12 Merrett and Ville, “International Business,” 7; Wilkins, Mira, “The Free-Standing Company: An Important Type of British Foreign Direct Investment,” Economic History Review 41, no. 2 (1988): 261CrossRefGoogle Scholar.

13 A bureaucratic structure was created that perpetuated high costs, was resistant to innovation, and stifled the competitive edge needed to take the industry forward. Garry Pursell, “Development of Non-Life Insurance in Australia” (PhD diss. Australian National University, 1964), 515–16.

14 Benjamin, Rodney and Merrett, David, “Financial Services: Banking and Insurance,” in The Internationalisation Strategies of Small-Country Firms: The Australian Experience of Globalisation, ed. Dick, Howard and Merrett, David (Cheltenham, U.K., 2007), 155Google Scholar.

15 Merrett, David T., “Paradise Lost? British Banks in Australia,” in Banks as Multinationals, ed. Jones, Geoffrey (London, 1990), 64–65Google Scholar.

16 Merrett, David T., “The Internationalization of Australian Banks,” Journal of International Financial Markets, Institutions and Money 12, no. 4–5 (2002): 379CrossRefGoogle Scholar.

17 Merrett, “Paradise Lost?,” 67–68.

18 Peter Borscheid and Niels V. Haueter, eds., World Insurance: The Evolution of a Global Risk Network (Oxford, 2012). Other notable works include Peter Borscheid and Robin Pearson, eds., Internationalization and Globalization of the Insurance Industry in the 19th and 20th Centuries (Zurich, 2007); and Robin Pearson, ed., Development of International Insurance (London, 2010).

19 Johanson, Jan and Vahlne, Jan-Erik, “The Internationalization Process of Firms: A Model of Knowledge Development and Increasing Foreign Market Commitments,” Journal of International Business Studies 8, no. 1 (1977): 23–32CrossRefGoogle Scholar; Johanson and Vahlne, “The Uppsala Internationalization Process Model Revisited: From Liability of Foreignness to Liability of Outsidership,” Journal of International Business Studies 40, no. 9 (2009): 1411–31.

20 Dunning, John, “The Eclectic Paradigm of International Business: Past Present and Future,” International Journal of the Economics of Business 8, no. 2 (2001): 173–90CrossRefGoogle Scholar.

21 David Collis, “A Resource-Based Analysis of Global Competition: The Case of the Bearings Industry,” Strategic Management Journal 12, no. S1 (1991): 49–68.

22 Christopher A. Bartlett and Sumantra Ghoshal, Managing across Borders: The Transnational Solution (Boston, 1998), 39–40.

23 Collis, “Resource-Based Analysis,” 52.

24 Pankaj Ghemawat, Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter (Boston, 2007), 40–49.

25 Johanson and Vahlne, “Internationalization Process.”

26 Johanson and Vahlne, 1415.

27 Jan Johanson and Jan-Erik Vahlne, “Business Relationship Learning and Commitment in the Internationalization Process,” Journal of International Entrepreneurship 1, no. 1 (2003): 92.

28 Johanson and Vahlne, “Internationalization Process,” 1423–25.

29 James C. Anderson, Håkan Håkansson, and Jan Johanson, “Dyadic Business Relationships within a Business Network Context,” Journal of Marketing 58, no. 4 (1994): 3.

30 Jan Johanson and Lars-Gunnar Mattsson, “Internationalisation in Industrial Systems – A Network Approach,” in Strategies in Global Competition, ed. Neil Hood and Jan-Erik Vahlne (London, 1988), 296.

31 Carl Solberg and Vidar Askeland, “The Relevance of Internationalization Theories: A Contingency Framework,” in Managerial Issues in International Business, ed. Felicia Fai and Eleanor Morgan (Hampshire, 2006), 14.

32 Francisco Figueira-de-Lemos, Jan Johanson, and Jan-Erik Vahlne, “Risk Management in the Internationalization Process of the Firm: A Note on the Uppsala Model,” Journal of World Business 46, no. 2 (2011): 143–53.

33 Borscheid and Haueter, World Insurance.

34 Wilkins, “Multinational Enterprise,” 346; Pearson, Development of International Insurance.

35 Trebilcock, Phoenix Assurance; Barry Supple, The Royal Exchange Assurance: A History of British Insurance, 1720–1970 (Cambridge, U.K., 1970).

36 Johanson and Vahlne, “Internationalization Process.”

37 Johanson and Mattsson, “Internationalisation in Industrial Systems,” 296.

38 Pursell, “Non-Life Insurance,” 296–97.

39 Robin Pearson, “United Kingdom: Pioneering Insurance Internationally,” in Borscheid and Haueter, World Insurance, 69–70.

40 Barry Supple, “Corporate Growth and Structural Change in a Service Industry: Insurance, 1870–1914,” in Essays in British Business History, ed. Barry Supple (Oxford, 1977), 71; Pearson, “United Kingdom,” 70.

41 Monica Keneley, “Business Strategies under Conditions of Uncertainty: The Rise of Mutual Life Insurers in Colonial Australia,” in Corporate Forms and Organizational Choice in International Insurance, ed. Robin Pearson and Takau Yoneyama (Oxford, 2015), 176.

42 Supple, “Corporate Growth,” 69–70.

43 Supple, 71; Oliver Westall, “David and Goliath: The Fire Offices Committee and Non-Tariff Competition, 1898–1907,” in The Historian and the Business of Insurance, ed. Oliver Westall (Manchester, 1984), 130–54.

44 Pearson and Lönnborg, “Regulatory Regimes,” 62–63.

45 Pursell, “Non-Life Insurance,” 159.

46 Robin Pearson, “Taking Risks and Containing Competition: Diversification and Oligopoly in the Fire Insurance Markets of the North of England during the Early Nineteenth Century,” Economic History Review, n.s., 46, no. 1 (1993): 52–54.

47 Monica Keneley, “The Origins of Formal Collusion in Australian Fire Insurance, 1870–1920,” Australian Economic History Review 42, no. 1 (2002): 62–63.

48 Foreign Agency Memorandum, 11 Sept. 1868, Sun Ms31522 Letterbook (hereafter Sun Letterbook), vol. 23, London Metropolitan Archives (hereafter LMA).

49 Foreign Agency Memorandum, 27 May 1877, Sun Letterbook, vol. 25, LMA.

50 For example, the Sun representative reported of Jacques Martin (founder of the Colonial Mutual Life Association) that “he is thoroughly known as an unscrupulous man but his keen will seems to help him through anything.” Foreign Agent Report, Sun Letterbook, vol. 23, Victoria 2, LMA.

51 Foreign Agency Memorandum, 7 Dec. 1868, Sun Letterbook, vol. 12, Victoria, LMA.

52 Foreign Agency Memorandum, 7 Dec. 1868, Sun Letterbook, vol. 12, Victoria, LMA.

53 Foreign Agent Report, Sun Letterbook, vol. 23, Australia, 264, LMA.

54 Foreign Agent Report, Sun Letterbook, vol. 23, Australia, 263, LMA.

55 Foreign Agency Memorandum, 27 June 1867, Sun Letterbook, vol. 12, Victoria, LMA.

56 The manager of the Royal, for example, was directed not to use the telegraph too frequently because of the cost involved. Foreign Agency Memorandum, 5 Mar. 1893, Royal Letterbook, LMA. Dr. Garry Pursell, card index, G. Pursell private papers in possession of the author (hereafter Pursell Collection).

57 Foreign Agent Report, 27 June 1877, Sun Letterbook, vol. 25, Victoria, LMA.

58 Foreign Agent Report, Sun Letterbook, vol. 23, Australia, 86–87, LMA.

59 Foreign Agent Report, 27 Nov. 1867, Sun Letterbook, vol. 23, Victoria 2, LMA.

60 Foreign Agent Report, Sun Letterbook, vol. 23, Australia, 220, LMA.

61 Mr Manvell's Report, 1877, Sun Letterbook, vol. 25, Victoria, LMA.

62 Supple, “Corporate Growth,” 69.

63 Raynes, British Insurance, 271.

64 Pearson, “United Kingdom,” 70–71.

65 McLean, “Australian Economic Growth,” 332.

66 Foreign Agent Report, 17 Jan. 1878, Sun Letterbook, vol. 26, LMA.

67 Pursell, “Non-Life Insurance,” 297.

68 Foreign Agent Report, 17 Jan. 1878, Sun Letterbook, vol. 26, LMA.

69 Australasian Insurance and Banking Record (hereafter AIBR), 8 Jan. 1879 (Melbourne), 12.

70 Foreign Agent Report, 7 Dec. 1868, Sun Letterbook, vol. 23, Victoria 2, LMA.

71 Westall, “Marketing Strategy,” 27; Supple, “Corporate Growth,” 71

72 N. G. Butlin, Investment in Australian Economic Development, 1861–1900 (Cambridge, U.K., 1964), 187–208.

73 Foreign Agency Memorandum, Sun Letterbook, vol. 12, Victoria, LMA.

74 Batavia Sea and Fire opened an agency in Sydney in 1862 but did not sell fire insurance until 1892. Netherlands India Marine and Fire also established an agency in 1862 but did not actively sell fire insurance. Pursell, card index, Pursell Collection.

75 Keneley, “Business Strategies,” 174.

76 Foreign Agent Report, Sun Letterbook, vol. 23, Victoria, LMA.

77 Pursell, “Non-Life Insurance,” 297; Foreign Agent Report, 24 Nov. 1885 and 11 Sept. 1889, Sun Letterbook, vol. 26, LMA.

78 Pearson, “United Kingdom,” 71; Pearson and Lönnborg, “Regulatory Regimes,” 61–62.

79 Cannon, Michael, The Land Boomers (Melbourne, 1995)Google Scholar; Lionel Frost, “Urbanisation,” in Ville and Withers, Cambridge Economic History of Australia, 245–63.

80 AIBR, 1885, 555. The AIBR listed only the total fire premiums for British companies operating in Australia. These companies did not publish separate statistics for the colonies. Westall, “David and Goliath,” 31.

81 Supple, “Corporate Growth,” 71.

82 Westall, “David and Goliath,” 131–32.

83 Foreign Agent Report, Sun Letterbook, vol. 23, Australia, 263, LMA.

84 Wickens, P. C., Insurance Institutes in Australia, 1884–1994: A Century of Service (Melbourne, 1984), 10–11Google Scholar.

85 See, for example, Clement Jarrett, “Advantages of Co-operation,” in AIBR, 1887, 586–88.

86 Foreign Agent Report, 8 Apr. 1881, Imperial Letterbook, Pursell Collection; Foreign Agency Memorandum, 1863–1888, Commercial Union Foreign Letterbook, Australia No. 1, Pursell Collection; Foreign Agent Report, Sun Letterbook, vol. 25, Victoria, LMA.

87 Foreign Agency Memorandum, 30 Sept. 1878, Sun Letterbook, vol. 14, NSW, LMA; AIBR, 1879, 101; AIBR, 1882, 374.

88 Foreign Agency Memorandum, 30 Sept. 1878, Sun Letterbook, vol. 14, NSW, LMA.

89 AIBR, 1886, 351–52; Rodney Benjamin, “Private and Public Regulation of the General Insurance Industry in Australia, 1897–1992” (PhD diss., University of Melbourne, 1993), 46.

90 AIBR, 1893, 1066–67.

91 Westall, “David and Goliath.”

92 Pursell, “Non-Life Insurance,” 278.

93 Foreign Agent Report, 24 Nov. 1885 and 11 Sept. 1889, Sun Letterbook, vol. 26, LMA.

94 Foreign Agency Memorandums, 1863–1888, Commercial Union Foreign Letterbook, Australia, Pursell Collection. The Imperial Fire Office described the Commercial Union as “greedy and unprincipled.” Extracts from Foreign Agent Report, 20 Oct. 1882, Imperial Fire Office Letterbook, Pursell Collection.

95 Foreign Agency Memorandum, 26 Feb. 1880, Sun Letterbook, vol. 14, NSW, LMA.

96 Edward Liveing, A Century of Insurance: The Commercial Union Group of Companies, 1861–1961 (London, 1961), 44.

97 Silberberg, Ron, “Rates of Return on Melbourne Land Investment, 1880–92,” Economic Record 51, no. 134 (1975): 216CrossRefGoogle Scholar.

98 AIBR, 1890, 446; Pursell, “Non-Life Insurance,” 308.

99 Thompson, Andrew S. and Magee, Gary B., Empire and Globalisation: Networks of People, Goods and Capital in the British World, c.1850–1914 (New York, 2010), 227–28Google Scholar.

100 AIBR, 1885, 292.

101 Pursell, “Non-Life Insurance,” 251–52.

102 AIBR, 11 Jan. 1882.

103 AIBR, 15 June 1888.

104 AIBR, 8 Mar. 1877; AIBR, 16 Jan. 1888.

105 Merrett, David, “The Australian Bank Crashes of the 1890s Revisited,” Business History Review 87, no. 3 (2013): 409–11CrossRefGoogle Scholar.

106 Pursell, “Non-Life Insurance,” 159.

107 Benjamin, “Private and Public Regulation,” 52.

108 Benjamin, 54. This is confirmed in the records of the Victoria Insurance Company; see Manager's letters to branches, 1889–95, Victoria Insurance Co. Letterbooks, University of Melbourne Archives.

109 Silberberg, Ron, “The Melbourne Land Boom,” Australian Economic History Review 17, no. 2 (1977): 216CrossRefGoogle Scholar.

110 Pursell, “Non-Life Insurance,” 310.

111 For example, a block fire in Melbourne's warehouse and clothing sector in 1897 involved a loss of £700,000. An earlier block fire in Sydney, in 1890, led to total insurance company liability of around £700,000.

112 For example, Charles Salter of the Royal reported to the company's London managers that he expected they would be in a much better position once the economy recovered, as they had not had to sell assets. Foreign Agent Report, 24 July 1893, Royal Letterbook, Pursell Collection.

113 AIBR, 1931, 243.

114 Trebilcock, Phoenix Assurance, 189–90; Foreign Agent Report, 1 Nov. 1894, Royal Letterbooks, Pursell Collection.

115 AIBR, 1895, 621. The Fire Offices Committee Foreign was established in 1869 to oversee foreign tariffs.

116 The tariff rated every type of fire risk for each town in Victoria. It had over eight hundred classifications in the document, which was in excess of one thousand pages. Benjamin, Rodney L., Paths to Professionalism: A History of Insurance Broking in Australia (Burwood, 1988), 31Google Scholar.

117 Pursell, “Non-Life Insurance,” 407–12.

118 Other fragments of information from other companies exist but not enough to draw conclusions on trends. Trebilcock for example, calculates net underwriting surplus on a five-year average for the Phoenix; see Trebilcock, Phoenix Assurance, 292. As this was not comparable it was not included in the table.

119 This agreement determined the location and number of agents, the appointment and remuneration of directors and chief agents, and the level of discounts given. In effect it prescribed the behavior of firms in relation to nonprice competition. Pursell, “Non-Life Insurance,” 412–18.

120 Supple, “Corporate Growth,” 70.

121 Supple, Royal Exchange Assurance, 297–300.

122 Pursell, card index, Pursell Collection.

123 Estimated numbers based on Victoria Government Gazette, no. 41 (23 Mar. 1910), 1920. These figures relate to the fire market only; a number of other insurers established in the new emerging markets and Lloyds brokers also started to make their mark.

124 This agreement was not dissolved until trade practices legislation in 1973 made cartel associations illegal.

125 Johanson and Vahlne, “Uppsala Internationalization Process,” 1416–17.

126 Johanson and Vahlne, 1417–18.

127 Mr Manvell's Report, 1877, Sun Letterbook, vol. 25, LMA.

128 Benjamin argues that the culture of price agreements was firmly established among British firms by the 1790s. Benjamin, “Private and Public Regulation,” 37; Supple, Royal Exchange Assurance, 90.