Manufacturers mutual fire insurance company, Providence. | State Archives Catalog
During the depression of 1835, Zachariah Allen, a prominent textile mill owner, attempted to reduce the insurance premium on his Rhode Island, USA, mill by making property improvements that he believed would minimize the damage in case of fire. At that time, insurance premium increases for losses were shared among all insureds, regardless of individual loss history. The concept of loss prevention and control was virtually unheard of at the time. To Allen, a proactive approach to preventing losses made good economic sense.
After making considerable improvements to his mill, Allen requested a reduction in his premium, but was denied. He called upon other local textile mill owners who shared his loss prevention philosophy to create a mutual insurance company that would only insure factories with lower risks. This approach should result in fewer losses and smaller premium payments. Whatever premium remained at the end of the year would be returned to policyholders in the form of dividends. The group agreed, and by year's end, formed the Manufacturers Mutual Fire Insurance Company, the oldest predecessor of FM Global.
During the company's first 14 years, the mill owners and mutual policyholders of Manufacturers Mutual enjoyed an average 50-percent reduction in premium compared with what other insurance companies were charging. The fire prevention methods they developed, monitored by regular fire inspections for mill policyholders, resulted in fewer losses. Despite its initial success, one problem remained for the pioneer mutual insurance company: a single mutual insurance company could not withstand the financial cost of the loss of an entire plant. More insurance capacity was needed, so in 1848, Allen formed another mutual insurance company, Rhode Island Mutual.