Moral Hazard and the Assessment of Insurance Risk in Eighteenth-and Early-Nineteenth-Century Britain

Insurance is a business in which trust is the corollary of risk taking. One problem for the insurance industry in eighteenth and early nineteenth-century Britain was how to bridge the gap between the world of business based upon personal trust, and the emergence of new commercial relations where moral hazard was mass produced and where a commanding knowledge of personal reputations was virtually impossible. This paper examines the imperfect methods devised by early life and fire insurance offices to assess both physical and moral hazard and postulates a relationship between the two. The responses to two particular moral hazard “problems” identified by contemporary underwriters–insurance by the Jews and the Irish–are explored.