General Articles

RISKY BUSINESS

Arthur Melling will insure you against a cloudburst, a smashup or twins. Lloyd’s of London rates him tops

HUGH KEMP April 15 1948
General Articles

RISKY BUSINESS

Arthur Melling will insure you against a cloudburst, a smashup or twins. Lloyd’s of London rates him tops

HUGH KEMP April 15 1948

RISKY BUSINESS

HUGH KEMP

Arthur Melling will insure you against a cloudburst, a smashup or twins. Lloyd’s of London rates him tops

ONE WEEK last autumn, two railway accidents occurred; one near Chicago, the other in the Canadian East. Shortly afterwards, two insurance claims passed over the desk of Arthur Lifton Melling of Montreal. One of them was from the American railway, claiming a quarter of a million dollars for damage to equipment. The other was from a lady passenger in Canada, requesting $28 compensation for her false teeth, which had been shattered in a washbasin.

In the same mail with the smaller claim were two applications for new insurance; one for an accident cover on a deep-sea diver and the other for insurance against impotence of a prize bull, i These were fairly routine matters to Arthur Meiling, international insurance broker whose business slogan is, “We Insure Everything Insurable.” In the insurance world, Meiling is very big time. At Lloyd’s of London—the heart of world insurance today—he is rated as one of the five top names in insurance on the North American continent. His business volume is well over two million dollars in premiums annually, which enables him to live in the best butler-and-chauffeur style.

Meiling acts both as an insurance agent, selling policies large and small to the public, and as an insurance broker or middleman between other insurance-selling agents and the underwriting firms who actually carry the risks involved. He also advises insurance companies on where to buy insurance to cover their insurance (a complexity which is explained later in this article).

An individual buying a life insurance policy has little difficulty beyond dodging all the other salesmen that follow the first one to his door— life insurance is a fairly standardized business and he can purchase almost identical policies from any one of several firms. But the man or company seeking insurance on a very large or unusual risk has a real problem. There may be several hundred companies who could take all or part of his business (there are 350 underwriting firms in Canada alone, each having their specialties) and the insurance buyer seldom has sufficient knowledge to know with which firm or combination of firms to place his risk to greatest advantage.

Enter Mr. Meiling, the general agent. His job is to obtain for insurance buyers the kind of coverage best suited to their needs and to present the client’s case to the underwriters (who don’t just jump at every bit of business that comes their way) in such a manner as to make them decide the risk is a safe one. So complex is the insurance business, moreover, that many an agent finds himself unable to place his client’s business with his usual underwriters. That’s where Mr. Meiling the broker comes in, to help the other agent obtain the insurance needed. On all deals negotiated as agent or broker, Meiling collects a varying percentage of the premium involved—averaging about 10%.

While he will undertake to obtain almost any kind of insurance coverage, Arthur Meiling has made his reputation by his dealings in very large and unusual risks—the kind that are side-stepped by the conventional underwriters. Actually, it is unlikely that a major disaster could occur on this continent that wouldn’t bounce across his desk at one stage or another.

The full listing of his policies fills a book of several hundred pages; includes some of the smallest and some of the largest business written on this continent. On one page is a floater policy of a couple of thousand Continued on page 58

Continued on page 58

Risky Business

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dollars and on the next a 40-milliondollar policy covering a fleet of Amerii can streamlined trains. Every form of industry is represented there, as well as some colorful nonindustrial business. Some typical covers: a major Canadian oil company, Alaska fisheries, an interurban trucking firm, a national magazine (for libel resulting from errors), a stable of racing greyhounds, a Virginia coal mine (cloudburst insurance), disaster insurance on many American street railway systems, insurance against loss of radium stocks all over the world, the hands of a famous surgeon and the hands of a distinguished musician.

Meiling looks the part of the international broker. Now in his late forties, be has the compact build of a soccer player (which he was); dresses with a quiet Bond Street air. His face has the constantly tanned skin of a yachtsman (which he is), and light-blue eyes which don’t require glasses to spot trouble in the making. He has what might be called a financial mouth, which is most often clasped on a stubby pipe, and a thatch of boyish brown hair.

He speaks with the trace of a British accent left over from his boyhood in the town of Wallasey, a residential city across the river from Liverpool with a strong character of its own. Wallasey men are known in Britain for a quality of “downrightness” or “can’t stand blather.” Meiling fits this broad definition; reflects it in an extreme dislike of rugged extroverts. His office is peopled with soft-footed men who would go to any lengths to avoid trying to “sell” you insurance.

Melling’s own attitude is at the far end of the pole from the high-pressure outlook and this has produced some interesting results. Recently an American railway was transferring its account over to Meiling. At the last moment they decided to let the public liability coverage rest where it was until the following year. Apologetically they announced their change of mind; were surprised when Meiling replied, “By all means, gentlemen. I’ll be delighted to have it next year, or whenever it seems expedient.” A week later the railway suffered the first bad accident in its history. Melling’s constraint probably saved his underwriters at least a million-dollar claim.

Tidy Business

The Meiling office is in Montreal’s neat little Gatehouse Building on Dorchester Street, next to the CNR terminal and just across from the crusty Saint James Club.

From this vantage point—halfway between the United States and Britain in a business sense—Meiling directs his operations. While his affiliations are world-wide, the great volume of his business is done in Canada, the United States and Great Britain. Part of his art is in making capital of the insurance differences between these three countries.

Canada, in his view, is one of the world’s tidy countries in which to do business. Most of the coverage requested by Canadian clients is placed with Canadian underwriters and it all forms an orderly and sound package.

The United States, on the other hand, is the land of the client giants and the turbulent character. To the broker and his underwriters, this market is the plum or the sour grape, depending on his skill at placing the ; business and avoiding excessive claims’

I complications. The Americans are

almost overeducated to the value of insurance. Individual and corporation alike hesitate to step in any direction without being covered against any contingency. In some branches of the national activity, insurance is even regarded as valid grounds for a publicity campaign—Meiling has a 50thousand-dollar cover on the bust of a chesty young Hollywood actress (at $7.50 per thousand) and $10,000 on a dancer’s legs.

Oddly enough, while the American consumer is the world’s most convinced insurance buyer, the American underwriter is held to comparatively conservative policies by a rigid system of licensing. Largely because of this, most of the big and the unusual business which Meiling gets from the United States he places in London. For Great Britain is the country of adventurous underwriters.

Foremost among these, of course, is Lloyd’s of London, where deals can be swung that would not be entertained anywhere else in the world. That goes for the chests and the legs, where assessing the risk becomes an educated guess, as well as the more sober example which follows.

In the early months after America’s entry in the recent war, an American manufacturer approached Meiling with an insurance problem. He was making equipment for the armed services and in this connection had to place some of his best technical experts on all of the world’s fighting fronts. He wanted accidental death covers on these men —but there was a catch. Censorship prevented the revelation of the disposition of the men or, in the event of death, any details. London wrote the policies without a quaver, making the single exception that the men would not be covered if they went behind enemy lines. Later, when some of the men were reported “missing,” the client put in a claim. London paid off.

Meiling notes an interesting difference between dealings in the two countries which stems from a different attitude toward documents. The American underwriter wants everything down on paper. He writes very involved policies; attempts to cover every contingency with an appropriate clause. The Briton, on the other hand, writes a contract in broader and simpler terms and relies heavily on good faith to reach an understanding about details when the need arises.

As an illustration, Meiling quotes an agreement he witnessed between an American and a British financier during the war. The American submitted 22 pages of fine script. The Briton boiled it down to a single paragraph.

Of course, all is not unreserved joy about the London underwriters in the United States. There is a body of opinion there, and in Canada too, which points a figurative finger at the gay risk-takers and cries, “Ah, ha ! Not business, but gambling!” Of the critics, Meiling comments simply, “They just want to kick the fun out of the business.”

“Where’s It?”

One of the most interesting pieces of equipment in the Meiling office is the “Where Is It?” book. If an application comes in for insurance on a flagpole sitter or a hazardous mining operation, the first thing Meiling wants to know is the firm’s previous experience in such cases. All papers covering previous deals are filed away carefully somewhere and the “Where Is It?” book is simply a ready index by which to locate the proper folder. This tome records history from a special perspective. For instance, Pearl Harbor week shows up there through dozens of

applications for aircraft bombing insurance phoned in from Chicago and other points in Illinois. The people within range of Colonel McCormick’s Chicago Tribune seemed to feel more nervous than the people on either coast.

The benefit-concert phase of the war effort is reflected in many applications for nonappearance insurance. In this connection the book records the names of Arturo Toscanini, Elissa Land! and the late Leslie Howard. The purpose of this form of insurance is to protect the sponsoring organizations against loss of investment in the event that the star should not show for some reason. (Incidentally, two celebrities who have been covered by Lloyd’s with this type of insurance throughout almost their entire careers are Jack Benny and Mary Livingston.)

VE-Day is also celebrated in the “Where Is It?” book—but mainly as a postscript. The destructive moods of some crowds on that first day of peace inspired a number of applications from hotels and stores. They wanted property damage covers for VJ-Day. London was delighted to oblige.

The tragic hotel fires and airplane crashes of the immediate postwar days brought new applications in their wake. The polio epidemic was accompanied by the underwriting of a large volume of “polio insurance,” which for a $6 premium would pay $5,000 if the person insured contracted the disease.

The development of aviation since the early 30’s is sketched interestingly. The first figure on the aviation scene was the test pilot and in those days of the 10 G pull-outs (trying to tear off the wings) only Lloyd’s would take the risk on a flier’s life or on damage to an aircraft. Then came the covers cn the Canadian airlines. And then the appearance of the private light plane with its special insurance problems.

In spite of Melling’s frank slogan, “We Insure Everything Insurable” he has failed, on occasion, to get his clients’ risks covered even in London. Then all he can tell the client is “so sorry.”

The reasons for refusal are sometimes based on nothing more than personal prejudice. More often, however, the underwriters have been burned unduly and have become hypersensitive.

Flood insurance is on the black list at Lloyd’s because in many areas floods are so unpredictable that setting an insurance rate is impossible. Orce Meiling appealed a rejection for th:s type of cover and a director of the syndicate came back with the following comment: “Meiling, I just don’t like

flood. I don’t even like the word. And for that good reason I wouldn’t sell flood insurance in the Sahara.”

Another type of cover turned down flat was “hole-in-one” insurance. An American cosmetic company wanted to give 20 of their best customers presents in the form of policies which would pay a hundred dollars on a hole in one. The company applied to Meiling, who in turn queried Lloyd’s. A sober reply came back: “This class of business has not proved very profitable.”

Meiling, the broker, also has his troubles with Meiling, the client. Recently he obtained supplemental cover on his own home—a type of fire insurance policy which covers additional hazards but on which his office had never had a claim. Promptly a runaway automobile cracked into his newly beautified house; established a first claim for the office.

At another time, Meiling had his difficulties with twin insurance. He had been getting this cover for his customers through Lloyd’s at three and a half per cent of the policy value, premium payable within the first three

months of pregnancy. When he tried to get it himself when his own wife became pregnant, back came the answer from Lloyd’s—for you, seven per cent. Meiling appealed, documenting that the history of twins in his family was on the father’s side only.

Lloyd’s were adamant—seven per cent. Mrs. Meiling obliged with a charming girl, unaccompanied. Two years later the situation recurred. Out went another request and back came the reply “Seven per cent.” The result: a boy for Mrs. Meiling, also without escort.

Obtaining insurance for the large and unusual risks is the profitable end of brokerage. On the other side of the ledger is the business of claims. Here is where the broker can catch it in the neck, if his advice has not been the best. As noted previously, Broker Meiling does not share such losses— but it is vital to his business to see that his clients collect on all legitimate claims, and that his underwriters have not, on his urging, taken on a bad risk.

Such Anguish

Canadian claims are not usually difficult to settle. The Canadian courts are quick enough to recognize a tangible loss or injury, but don’t place high money values on such frills as mental anguish.

The American courts, on the other hand, are very generous with suffering indemnities and other such intangibles. As a result, the United States has developed a highly “claims-conscious” populace and a new and shysterish offshoot of the legal profession known as the “ambulance chasers.” The ambulance chasers spend their time following up accidents and trying to persuade the victims to let them file large suits. When these are successful the insurance companies end up the losers through their public-liability underwriting.

A typical “suffering” claim passed through Melling’s office recently in connection with an American cemetery account. A tombstone had been marked by vandals and the relatives of the deceased sued the company for compensation for mental anguish. The judge came through handsomely; the insurance company paid.

A quaint claim that involved Meiling cropped up during the depth of the depression. Covers had been written earlier on the jewelry of a well-to-do European gentleman who had settled in Montreal. Then, in the crash, he had lost everything and was hardpressed by creditors. One night one of his jewelry boxes was stolen—but the other two right beside it were left untouched. The insurance underwriters were convinced that the whole deal was stacked and the president of the firm visited Meiling, who was ill in hospital at the time. “We’re not going to pay your client,” he said.

“Don’t make a decision,” said Meiling.

“Why not? The thing is pretty obvious.”

“Maybe it is, but I think the old man is all right.”

The underwriter went away, agreeing to hold off 81 least until Meiling was out of hospital. Two days later he was back with a strange little tale. The police had caught a burglar in the far end of the city who had proudly confessed his recent accomplishments. Among them, the pilfering of the jewel box.

“WThy did he leave the other two?” Meiling wanted to know.

“Because his flashlight failed on the job and he had to work by the touch system.”

One of Melling’s specialties is the

highly involved form of underwriting known as reinsurance.

Reinsurance is the process of insuring the insurance. When any underwriting firm takes on a major risk, it generally puts a good part of this risk on the market right away for other companies to underwrite second-hand. Another company might take on a large chunk of the risk and then in turn offer part of this out again. This third stage is known as retrocessional insurance—a lable which also applies to the fourth, fifth, sixth, etc., stages.

The effect of reinsurance is primarily that any major disaster ricochets through the entire insurance world and no one company is knocked out by a claim. The aim of each underwriter, of course, is to get his business spread most advantageously in the reinsurance market. Frequently, when Meiling places very large insurance With an underwriter, he follows this up by counseling the underwriter on how best to redistribute it.

The nature of reinsurance can produce some highly interesting complications. For example, the following situation which cropped up during the early months of the war. An American munitions plant was reinsured through four different countries. Documents concerning the plant landed finally in a neutral European power and from there the information on American arms crossed the border into Germany. As a result a special office was set up by the British Government on this side to mount guard on all secret deals.

Another reinsurance anecdote concerns the take-a-chance nature of Lloyd’s and the liner Europa. Just before this ship was launched in 1929, it caught fire. While it was actually burning, the insurance underwriters who had the covers rushed into Lloyd’s frantically offering fat premiums to anyone who would take reinsurance at that late hour on the Europa. A number of Lloyd’s underwriters bought in. Then the fire was put out before it did great damage and the Lloyd’s men made a killing.

Lumberjack to Broker

Arthur Meiling got into the insurance business purely by chance. He came out to Canada after World War I at a time when many restless young men were emigrating from Britain to this land of opportunity. For a while he knocked around the lumber camps in the northern bush, then returned to Montreal to look for a job. When an insurance company offered him a pest as a clerk, he took it; later made brief stays with various kinds of underwriting firms.

The brokerage business appealed to him primarily because “there were fewer people in between the junior clerk and the president.”

His present success he attributes to nothing more mysterious than knowing the business and working at it. Today he is president of two Canadian brokerage firms, Richards, Meiling and Co. Ltd., which handles his Canadian business, and Meiling and Bevingtons, Ltd. which attends to U. S. business. He is also in partnership with several prominent members of Lloyd’s of London.

He employs a staff of about 20 in Montreal, made up mainly of experts in the various branches of insurance. These men stand somewhat in awe of their boss, an attitude which is partly inspired by his memory.

Meiling has a memory like a filing cabinet equipped with automatic reminder tabs. He embarrasses his staff regularly by saying, “Eleven months ago you told me such and such . .

He even gets the words right. If this

is tough on the staff, it’s almost a secret weapon at meetings with big clients. While they go hunting through their papers, he quotes the clause they are looking for word for word.

He is also a checker. Give him a column of figures, say the staff, and he will automatically add them up.

Periodically he suffers a great restlessness, a trait he comes by honestly. His father was a square rig extra master sea captain (the highest degree a mariner can win), and young Arthur spent a great part of his youth on the seven seas. Now, when he gets the urge, he jumps a train and makes a circle tour of Canada and the northern United States; spends a good deal of time surveying the operating conditions of his clients. At such times, so say his staff, his conversation is dominated by a “what-happens-if . . .” motif. It has become a little game with him to calculate the hazards of almost every activity he witnesses. That goes for fishing off Alaska, or just walking down the street. The game has paid offin benefits to many of his clients.

“Who Pays?”

One day last summer he was sitting in his car outside a client’s garage watching a neon sign swinging in the wind. Suddenly he got out and went to the manager with the question, “If that sign comes loose and falls on somebody . . . who pays?”

“I don’t know,” said the puzzled gentleman, “it belongs to a new tenant.”

“Neither do I,” said Meiling. He returned to his office and dug into the files. The wording of the policy was changed to cover public liability of a building owner, even though a damage claim might be due to a tenant’s doings.

On another occasion he changed the word “or” in a policy to the phrase “resulting from.” The inspiration for this change popped into his mind while he was shaving one morning—and it saved a client $50,000. The original policy read “loss or damage to other people’s property.” Meiling changed it to “loss resulting from damage to other people’s property.” This phrase is in common use in insurance now, hut it was quite singular when Meiling first conceived it.

The concern about in, on, over, by reason of, in consequence of, and other such terms, is a valid one in the insurance business.

One of Melling’s continuing problems has been that of excess energy. In his younger days he worked it off through golf, squash, and sailing as crew member and skipper in international smallboat races. Then, just before the war, he turned to gentleman farming, bought two farms and rented a third, ended up shipping 200,000 pounds of milk a year to Montreal.

During the war he devoted a very great deal of his time to setting up the Air Cadet League of Canada. He planned the complete development of that organization from its inception and as its president spent long months at Air Force Headquarters in Ottawa. The first year of peace found Meiling looking for a new activity and now he is busily collecting material for a book he wottld like to write some day on the history of insurance and on the relation of insurance to the individual and the community.

Today there is hardly a phase of human activity that insurance doesn’t touch. And, as Arthur Meiling sees it, insurance discharges one of the highest social functions of any business by harnessing the law of averages in the service of every man.

More recently it has begun to be used as a remedy for certain economic maladies. Credit, insolvency and bad-

debt insurance has done a great deal to promote international trade, particularly among small importers and exporters. Another economic malady that can be treated effectively by insurance is unemployment. Used sagely by the state, unemployment insurance can help the national patient by keeping purchasing power at least at minimum levels.

Looking ahead, Arthur Meiling foresees the day when the insurance prin-

ciple may well be used to affect the business cycle. This thought, which he utters with a half smile, was inspired by an application from a firm which had built up large stocks of platinum during the war. The company officers feared that the price might drop sharply after the war and sought protection against undue market fluctuations. Moiling studied the problem; could think of no underwriters for this type of business. Not yet, that is. if