Gotcha Covered: The Iowa Insurance Story
In Iowa insurance played a vital role in the expanding commerce of frontier communities. The Mississippi River was an important transportation route for goods and people. It also contained treacherous currents and hazards such as sandbars, winter ice and uprooted trees. Insurance eased the risk of loss for merchants and steamboat owners. As commercial operations expanded, so did the need for insurance.
Tragic fires haunt Iowa history. In 1837 a fire destroyed the territorial capitol, five stores and two groceries in Burlington. Dubuque's St. Cloud Hotel, once called the "largest building in the entire west," was destroyed in an 1858 fire. In 1889, forty-one buildings in downtown Grinnell burned in less than three hours. Fireworks nearly destroyed downtown Spencer in 1931.
A special type of insurance known as mutual thrived in Iowa. Iowans, especially farmers, liked mutual companies because such firms were small, locally owned, and their fees were relatively low. Church congregations, immigrant groups, and farmers' organizations (like the Grange) started mutuals. Unlike other insurance companies, mutuals charged policyholders only after a loss occurred. If there was no loss, there was no charge. Insurance companies, on the other hand, collected premiums in advance.
By 1920, 162 mutuals operated in Iowa. Some of them were formed to insure a specific industry or hazard. Mill Owners Mutual Fire Insurance Company was created in 1875 to provide insurance for grain mills. Other insurance companies had refused to insure the mills, which were considered a high risk for fire.
Tornadoes, common in Iowa, caused much destruction. Some insurance companies allowed their policyholders to cover any tornado damage through their fire insurance. The mutuals, however, were too small to cover such losses. Iowa Mutual Tornado, Cyclone and Windstorm Insurance Association was a statewide mutual established to protect against these expensive disasters.
Life insurance began as a way to provide two simple benefits: to pay for burial costs and to provide financial security for one's dependents. The large number of casualties during the Civil War underscored to many the need for life insurance. America's bloodiest conflict, it claimed the lives of 13,000 Iowans. In Iowa, where no life insurance companies had existed before the Civil War, the industry expanded dramatically after that tragic conflict.
Other events and innovations increased the need for life insurance. For instance, the Spanish Flu (1918-1919) killed 7,800 lowans. The flu caused a 25 percent drop in the average life expectancy of Americans. New methods of transportation, such as the automobile, resulted in the rise of accidental deaths.
Automobiles created new risks. Their great speed and size made them dangerous to people and property and expensive to repair when damaged. In 1898 Travelers Insurance Company of Hartford, Connecticut, issued the first automobile insurance policy. Many insurance companies that once sold only fire insurance began to sell automobile insurance.
Iowa insurance companies developed safety standards, which they also used to advertise their company. The State Auto Insurance Association placed "X marks the spot" signs at the scenes of fatal accidents to remind people to drive safely. IMT Insurance Company (Mutual) instructed children on traffic safety. Allied Mutual Automobile Association lent special dual-operated cars to driver-education classes.
Injuries on the Job
After the Civil War the invention of many new machines created new jobs for millions of American workers. But these new jobs, often involving unsafe machines, caused injuries for many workers. By 1900, the rising number of serious injuries caused Iowa to begin investigating the working conditions in the state's factories. By 1905, a commission documented about 140 accidents weekly.
In 1913, Iowa joined a nationwide trend when it passed worker's compensation laws. Now employers were responsible for injuries caused by defective machinery or negligence by the company's management. The Employer's Liability and Workmen's Compensation Act obliged Iowa employers to buy liability insurance. Early claims were most often the result of amputations. Today's claims largely involve medical problems related to repetitive movement ailments, such as carpal tunnel syndrome.
Early Health Insurance
Around 1888 residents of Muchakinock, Iowa, a coal-mining town, created one of Iowa's earliest forms of health insurance. The Society of the Muchakinock Colony was formed to provide burial expenses and pre-paid medical care. Single miners paid 50 cents, families paid $1 per month. This covered 80 percent of a doctor's bill. A miner also received $3 a week during an illness.
About the same time the Iowa State Traveling Men's Association was one of the nation's first insurance companies to provide protection for men who traveled for business. The Interstate Businessmen's Accident Association, formed in 1908, paid both death benefits and "loss-to-income" benefits to businessmen suffering either accidents or ill health.
One of the nation's earliest forms of health insurance for hospital care began in Grinnell in the 1920s. Grinnell College offered hospital care to students and faculty for a fixed monthly fee.
The Depression forced many people to go without medical care. Many hospitals nationwide faced bankruptcy. Unemployed people paid for hospital care with goods or services. Blue Cross and Blue Shield of Iowa and South Dakota began in 1939. Its pre-pay plan was designed to provide affordable health care and to save hospitals from bankruptcy. Members paid regular dues in exchange for hospital care. Blue Shield formed in 1945. It offered doctor-care benefits, with the doctor receiving payment directly from Blue Shield. This form of health insurance became a popular employment benefit for many companies. As health insurance increased in popularity, many other companies offered competitive plans.
The insurance industry has a long history in Iowa. Insurance companies played a key role in Iowa's frontier communities of the early 1800s. They continued to be a part of Iowa's history through the post-Civil War era, the coal mining days and the Great Depression years. And the insurance industry continues to play a major role in Iowa's economy. Several major insurance companies have located their corporate headquarters in Iowa and employ thousands of workers.