It has been exactly 100 years since the White Star Line’s pride, the RMS Titanic, struck an iceberg in the Atlantic Ocean and sank with the loss of over 1,500 lives.
The centenary prompted many insurance companies on both sides of the Atlantic to publish documents relating to the most significant maritime losses to date in terms of relative costs, mainly showing the involvement of their company in the payment of claims.
When the Titanic sank on April 15, 1912, the Lutine Bell was rung at Lloyd’s in London and a very rapid claim process began.
A few months earlier, the vessel owners, the White Star Line, had instructed insurance brokers Willis Faber and Co. to find coverage for the hull, cargo, contents and personal effects of the vessel. Willis Faber sent the “slip” to the mercantile division of their Lloyd’s where it was evaluated and subsequently subscribed by several unions 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 at the time. The policy also included total loss coverage for freight at $ 600,000 and content at $ 400,000 equivalent to two hundred thousand pounds.
The original brokerage slip passed around Lloyd’s has been lost, but has been photographed and can be seen in Wright and Fayles’ 1928 book “ A History of Lloyd’s’ ‘. It shows that seven major insurance companies have taken almost forty percent of the risk among themselves and the remaining sixty percent have been 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 percent. Modern rates for cruise ships are considerably lower.
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The ship was considerably underinsured, worth only five-eighths of its replacement cost. This was apparently because the owners thought the hull was unsinkable and were prepared to bear the additional $ 3 million of risk themselves.
Willis states that, despite the owners’ belief that the vessel was unsinkable, they had difficulty placing all of the hull cover at Lloyd’s and some forty thousand pounds were underwritten in Germany. There was also an extremely high excess or deductible of 15% of the insured value.
Four days after the Titanic sank, the United States Senate conducted a preliminary investigation at the Waldorf Hotel in New York. The surviving officers of the ship presented their evidence to the panel describing the events of the sinking and signed what is called a “protest” which allows 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 fully paid for the loss of cargo and contents within thirty days.
They were, however, largely underinsured for their liability to others given the value of the people on board. Claims against the company have exceeded their coverage by more than a million dollars and the question of whether they had private P&I coverage for their staff liability remains a mystery. Suffice it to say that the payments to the families of the lost crew members were paltry.
Claims for loss of people were more than five times the value of the ship, for the lucky ones who had life insurance or had individual accident insurance. Although there were no disputes over loss of life, families had to wait much longer than White Star for compensation.
Final payment for casualties has never been fully affirmed, as more than one hundred and fifty different life insurance companies have been covered on both sides of the Atlantic. American businesses have taken up the bulk of the claims, due to the many wealthy entrepreneurs and millionaire family members who have drowned.
The total loss is estimated to be around $ 20 million, and one of the largest payments was made by the Hartford Travelers Insurance Company, which paid over $ 1 million in life insurance.
The sinking of the Titanic also caused the first and only insurance claim for a car hit by an iceberg, by a Mr. William Carter who claimed five thousand dollars for his Renault of 25 horses, lost at sea.