Zachariah Allen (1795-1882): The Majority of Loss is Preventable
Zachariah Allen is the founder of a mutual insurance system based on loss prevention as the primary objective of risk management. He was born in Providence, Rhode Island in 1795. As a young boy, he acquired a love for knowledge (particularly in science and engineering) when he was presented a gift of an electrical apparatus from his older brother. He spent many hours experimenting with the toy, developing habits of analytical thought that later helped him attain success as an inventor and engineer.
In 1813, Allen graduated from Brown University in Providence and briefly considered medical school. He instead decided to pursue a career in law and had even passed the bar examination when a business opportunity arose. In 1822, he purchased the water rights to the Woonasquatucket River and built a mill to manufacture broadcloth. To avoid closing during the summer drought due to lack of power to the machinery (which resulted in losses to both owners and wage earners), he constructed a series of dams that eliminated the summer droughts and the spring floods. These were the first reservoirs constructed in the United States for the purpose of storing power for manufacturing.
He also introduced innovative concepts of industrial loss prevention to this mill, installing the first rotary fire pump, some of the first copper-riveted hose, and a central heating system that eliminated the need for stoves among machinery. The mill was one of the first in the country to incorporate “slow-burning” construction in order to increase the fire resistance of the structure, using large cross-section wooden beams, heavy wooden planks for flooring, and shingles set in mortar. This was in contrast to the traditional system of lighter joists and thinner flooring. He also built a fire wall to isolate the picker room, which was a common location of textile mill fires.
Despite taking numerous preventive measures that minimized damage to his mill in case of fire, Allen was not able to convince his insurance provider to lower his premiums. Therefore, he organized a mutual insurance company in 1835, the Manufacturers’ Mutual Fire Insurance Company, with other Rhode Island mill owners who shared his loss-prevention philosophy. Only factories with lower risks that were adequately protected against fire were insured; this resulted in reduced premiums compared to what other insurance companies would charge, as well as in fewer losses.
Because a single mutual insurance company could not endure the cost of the loss of an entire factory, Allen formed another mutual company in 1848, Rhode Island Mutual. He also assisted in the formation of other mutual insurance companies around New England. Together, these companies became known as the Factory Mutuals. Their purpose was to prevent fire rather than to simply pay the resulting losses. To this end, periodic inspections of the insured properties were instituted. They were first performed by the executives of the company, but as membership and the number of risks increased, the inspections were eventually carried out by engineering personnel employed solely for that purpose. Knowledge on fire causes from these early inspections eventually led to the formation of the Factory Mutual Laboratories in 1886, an organization dedicated to the testing of fire-protection devices (such as automatic sprinklers) and to the practical study of fire-protection engineering problems.
Today, the modern descendant of the Factory Mutual insurance companies is FM Global, an international property insurer that still maintains Zachariah Allen’s loss-prevention approach to risk management. Although the study of practical loss-prevention solutions for FM Global-insured clients remains the top priority, the Research Department at FM Global has evolved from the early Laboratories, now also focusing on long-term strategic and fundamental research in hazards from fires, explosions, natural catastrophes, and equipment failures