The Historical Development of Standard Policies

Abstract

Standard insurance policies have historically played an important role in the operation of the insurance business. With the possibility of Federal regulation of the business, the development of new products and new marketing methods, standard policies may become more important in the future. This paper fills a partial void in the literature and brings together in one place the historical development of standard policies including the reasons for their development. Two reasons were found to be common to the development of all statutory standard forms. The first was the lack of uniformity and its resultant effects. The second was the antithesis of the first and a result of it, being a desire to adopt policies to fit changed conditions by simplifying, clarifying, and modernizing forms to provide the insuring public with better protection. Standard insurance policies have historically taken one of the following forms: first, a statutorily prescribed policy; second, a policy with statutorily prescribed provisions; or third, a policy with standard provisions which are not prescribed by statute and whose use is not compulsory. The New York standard fire insurance policies are the best known, but there are or have been other standard policies which were developed by the industry either voluntarily or at the behest of judicial and legislative authorities. Certain developments taking place at the present time-especially the possibility of federal regulation, present and future product innovations, and new marketing methods utilizing the capacity of electronic computers-may result in a new interest in standard policies. This article consolidates the several histories of standard policies while setting forth the facts This paper was submitted in February, 1968. Thomas L. Wenck, Ph.D., C.L.U., C.P.C.U., is Associate Professor at Michigan State University. Formerly a research associate in the Wisconsin Insurance Department, Dr. Wenck taught at the University of Wisconsin. surrounding their development. In the process, the reasons for their development become evident and should be useful in any future considerations of standard insurance policies. The account which follows is compartmentalized in the same manner in which standard policies developed over the course of time in the various lines of insurance. Ocean Marine Insurance The Florentine statute of 1523 created a special administrative agency for the regulation of the insurance business, and provided for the appointment of commissioners by the city magistrates. These commissioners had extensive authority over insurance matters including, among other things, the power to disapprove clauses . . which were not in the standard form of policy-'the general and universal policy at present in use--. While there was regulation of insurance prior to this date, 1523 marks the earliest I Edwin W. Patterson, The Insurance Commissioner in the United States, (Cambridge: Harvard University Press, 1927), p. 515.