War in the 20th century and the impact on the insurance market

Article researched and written by Grace Maxted ACII, trainer, speaker, consultant and coach and history ambassador for the Insurance Museum
PREMIUM: Like many industries, the insurance market was considerably affected by both the First and the Second World War. We look at the growing tensions in the insurance market prior to the outbreak of the Second World War in 1939 and how it learned to adapt to the loss of expertise and the new insurance requirements that being at war presented 

On 11 November 1919, the famous Lutine Bell in Lloyd’s tolled for the first two-minute silence in history: one minute for those who survived and another to remember those lost. The Great War was over but like other sectors, the insurance market had lost many to the war effort. When insurance men returned from the trenches they were to attempt to sink back into normal life, where fresh socks were a novelty and chatter of rates and premiums was to replace the constant clatter of shells.

The number of insurance workers killed in the Great War is difficult to gauge as according to Andrew Carrick’s book, Until We See Daybreak, “…some 60% of First World War soldiers’ records were destroyed by German bombing on London in the Second World War…”.

Prior to the Great War, there had been optimism for growth in the insurance market. The market had gained worldwide recognition for Cuthbert Heath’s legendary payout of San Francisco earthquake claims; insurance law had been codified; the Chartered Insurance Institute had received Royal Charter; and insurers had been more concerned about damage caused by suffragettes than doodlebugs.

Following the slump that the years of the Great War had brought, the insurance market was able to thrive again. Fire insurance continued to collect considerable premiums and there was huge expansion in motor accident and other forms of liability: burglary, household damage and employers’ liability. General accident insurance grew substantially and increased from a premium income of £16m in 1913 to £80m on the eve of the Second World War.

In 1933, thoughts of the Great War had faded though were certainly not forgotten. A failed artist named Adolf Hitler had just become the Chancellor in Germany. The insurance market was yet again on the front line of the world’s changing political, social and economic environment, unaware that tensions in Europe would escalate to an unprecedented scale.

Preparing for war

Three years after Hitler was made Chancellor, Lloyd’s and other British insurers ceased to underwrite any kind of land war risk. In September 1938, when Neville Chamberlain met with Hitler and declared ‘peace for our time’ the insurance market let out a collective sigh of relief, despite concern that Hitler had been crossing his fingers behind his back.

By April 1939, the inevitability of war meant arrangements were made to protect buildings in the City against the physical threat of bombs. The Royal Exchange was protected by the installation of girders, bulkheads and an emergency ventilation system. 

Many insurance companies agreed to keep employees’ jobs open when they were called to participate in six months military training in May 1939. This had a large knock-on effect on service levels within the industry, though it was merely a taste of things to come.

In July 1939, there was concern in the market that the general public had become educated to claim for anything; it was labelled ‘damages consciousness’. It was particularly prominent in motor claims, private car insurance having tripled in the years following the end of the Great War and motor insurance having been made compulsory in 1930. During this time, the CII was holding its annual conference in the Guildhall.

One of the speeches at the banquet was given by Sir Stanley Aubrey, an underwriter at Lloyd’s, who toasted His Majesty’s Ministers and quoted King George VI: “Without freedom there can be no enduring peace, and without peace there can be no enduring freedom.” Seven weeks later, Britain was at war with Germany. The roof of the Great Hall at the Guildhall went on to be destroyed – in what became to be known as the Second Great Fire of London – in a Luftwaffe firebombing raid.

The phoney war

Between the invasion of Poland, Britain’s declaration of war and Christmas of 1939, not a great deal of fighting took place. Many were of the opinion that the threat of war had been unnecessarily exaggerated and the first few months were an anti-climax. As we know now, it was Hitler merely clearing his throat.

Having been unprofitable in the years following the First World War, the marine market was the first line of business to see the effects of the Second World War. The only initial signs that war had started were the sinking of British trade ships by U-boats and sea mines.

As the war eventually began to ramp up, it became apparent that it wasn’t just our service men that were at risk, so too were City workers. Working and living in London posed a constant threat of bombardment.

As the war progressed many insurance companies would relocate departments from the City to the likes of Oxfordshire and Welwyn Garden City.

Around 177,000 Londoners spent their nights cramped in air raid shelters or tube stations listening to the background noise of dull thuds, coughing and snoring from their fellow occupants. The City itself was no exception and Bank Underground station was hit frequently, on one occasion killing 80 people who were sheltered there.

Motor accident claims and losses for burglaries increased rapidly when reduced lighting became necessary in blackout conditions.

A photograph was taken in the aftermath of one particular air raid. It was of the Royal Exchange overlooking a crater on the City’s streets; draped across its pillars was the classic, ‘Dig For Victory’ banner from the government’s famous campaign.

The Royal Exchange after an air raid, with its Dig For Victory banner still flying
Business as (un)usual

Men aged 18 to 41-years-old who were not in ‘reserved occupations’ were called up to serve in the armed forces. At least half of male insurance workers were to join the armed services and around one third of women would leave the market to join the war effort. 

By this time, Winston Churchill had come onto the scene as Prime Minister. A known advocate for the insurance industry, having previously once said: “If I had my way, I would write the word ‘insure’ upon the door of every cottage and upon the blotting book of every public man, because I am convinced, for sacrifices so small, families and estates can be protected against catastrophes which would otherwise smash them up forever.”

Being an insurance professional was a well-respected occupation and because of the greater distinction in class status that existed at the time, those called to service in insurance were likely to become commissioned officers. Underwriters would typically achieve swift promotion to positions of command in their chosen service. The CII suspended individual memberships for those called to active service. It also suspended the publication of The Journal and cancelled all planned examinations in 1940. When France fell, a number of insurance men were captured and taken to prisoner of war camps. The Geneva Convention dictated that no commissioned officer could be put to work in the camps, so the men found themselves with a significant amount of time on their hands that they decided could be put to better use to progress their careers back home.

The men wrote to the CII asking for help to continue their studies via correspondence courses. The CII worked with the assistance of the British Red Cross Society and money was raised for books to be sent to the British prisoners. On three occasions, CII examinations were conducted within the prison camps. One of the prisons recorded was situated in Torun, Poland, another in Weinburg, Germany. Various insurance posts were filled by women who had remained in Britain and older men who were ineligible to serve. However, the replacement workers were untrained, leading to a number of errors and omissions when policies were placed incorrectly. It wasn’t just the insurance industry where positions were being filled by unskilled workers. Accidents began to increase with workplaces being shortstaffed and employees being unfamiliar with their role and sometimes staying on past their usual age of retirement. This led to a sharp growth in employers’ liability claims. Negligence also extended to the chaos of the front-line with one insurance man recorded as being accidentally shot and killed by British troops. 

Older men or those who were medically unfit to fight often worked as Fire Watchers and Air Raid Wardens, or became members of the Home Guard, which lovingly became known as ‘Dad’s Army’ during the war. Despite the public’s tongue-in-cheek perception of the role, it was still a dangerous one and during the course of the war over 2000 men serving with the Home Guard died of injuries, or were killed while on duty. The War Office stated in the early years of the war that Home Guard members would be allowed to carry ammunition in their cars without violating the terms of their motor policy as standard. 

The majority of Britons took their roles in the war effort seriously, though some were sent to jail for failing to report for duty at air raid posts they had been allocated to. Certain individuals were under scrutiny by the courts as ‘conscientious objectors’, with a judge stating in one case, “another insurance man…a lot seem to be going this way.”

In the thick of it

As the war dragged on, the insurance market would continue to get notable mentions. In May 1941, it was a Prudential employee on observation duty that saw Rudolf Hess, the deputy leader of the Nazi party who was later imprisoned in the Tower of London, fly his plane to Scotland, allegedly to begin peace negotiations with Britain. 

In the same month, the Lutine bell, usually struck to warn the Lloyd’s Underwriting Room of impending air raids, was struck just once to mark the Royal Navy’s success in sinking the German battleship, Bismarck.

The war was a real test of one of insurance’s most fundamental principles: proximate cause. There was a general reluctance to pick up war risks as they were seen to be inevitable rather than fortuitous. The market began to offer cover against air raid injury. Eagle Star Insurance Company looked to be the leader in this area of cover, stating that the policy would run, ‘for the duration of the war but not exceeding 12 months’ – a subtle reminder that the duration of the war was unpredictable. The threat of property damage was also growing as aircraft on both sides of the war would frequently jettison external fuel tanks when they were empty. Some policyholders would remove this peril from their Standard Fire and Special Perils policy in an attempt to receive a discount on their premium, believing that the government would cover it in any event – but this was not the case.

At the beginning of the Blitz, the government agreed to pay for war damage to private property, albeit with the caveat that these losses would only be settled after the hostilities had ended. Unlike the First World War, the government set out to prevent the insurance market from cherry picking the business and leaving the poor risks to the state. As a consequence insurance companies at the time agreed not to quote rates less than those of the government. Insurers acted as agents for the government – around 18 million policies were issued and over £300m in premiums were collected on behalf of the government under war damage schemes.

The War Damages Commission was responsible for one such scheme. This was wound up in the 1970s, however a margin of payments remained in the event of unexploded bombs from air raids being found and accidentally detonated in later years.

Women were advised to encourage their husbands to purchase a life assurance policy throughout the early years of the war. In the event that dependants wished to claim under the policies if the policyholder was declared missing, they could do so; however, if the policyholder was subsequently found alive, any payments received were to be returned to the insurer.

War in the 20th century and the impact on the insurance market

November 10th 2022

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