The Travelers Corporation
The Travelers Corporation
One Tower Square
Hartford, Connecticut 06183
Fax: (203) 277-7979
Incorporated: 1863 as The Travelers Insurance Company
Assets: $56.75 billion
Stock Exchanges: New York Pacific London
The Travelers Corporation is a diversified multi-line insurer that has been an insurance-industry leader for more than a century. The company introduced accident insurance to the United States in 1864, wrote its first automobile policy in 1897, and initiated aviation insurance in 1919. Today the company is one of the largest insurers in the world.
On March 24, 1864, James G. Batterson, founder of The Travelers Insurance Company, met local banker James Bolter at the Hartford, Connecticut, post office. Bolter had heard about Batterson’s plan to start a company to insure travelers against accidents, and asked Batterson how much it would cost to insure him against an accident on his way home for lunch—a distance of four blocks. “Two cents,” replied Batterson, who quickly pocketed Bolter’s pennies. James G. Batterson had just written the first accident policy for Travelers Insurance Company, although the company did not officially open for another week. Bolter, incidentally, arrived home safely.
James Batterson was born in 1823, the son of a Bloom-field, Connecticut, stonecutter. At age 15 he was apprenticed to a printer in Ithaca, New York, during which time he spent his evenings studying the books of his friends in college. After three years Batterson was called back to help with his father’s stonecutting business, which, under Batterson’s leadership, earned a nationwide reputation. Batterson contributed to the design and sculpting of the National Soldiers Monument at Gettysburg, Pennsylvania, as well as other monuments at Antietam, Maryland; San Francisco, California; and Galveston, Texas.
In the 1860s accident insurance was an unknown commodity. Travelers Insurance Company employed extensive advertising to help promote its unique service; early ads incorporated news stories of disasters. A variety of promotional novelties were employed, and Thomas Nast, a popular cartoonist, illustrated a number of the early advertisements.
During the first few years of operation Travelers was constantly mapping new ground. Premium fluctuations and restrictions on policies frustrated agents and customers, but slowly accident policies gained consistency and caught on with the public. The Industrial Revolution had increased the number of occupational hazards, which were publicized by accident insurers. Travelers agents also sold accident policies at railway stations, promoting sales by “being at the right place at the right time.”
In 1865 Travelers began selling life insurance, becoming the first insurance company to offer more than one line of insurance. For the rest of the 19th century, most companies focused on a single line of insurance. When other carriers began to diversify at the turn of the century, Travelers already had extensive experience and a substantial lead as a multiline insurer.
An umbrella was seen in Travelers ads as early as 1870. It frequently appeared in corporate advertisements over the next 90 years. In 1960 the company adopted the familiar red umbrella as a symbol of the protection provided by Travelers’s policies.
In 1889 Travelers diversified into liability insurance. Employer’s liability, a predecessor of workers’ compensation, was first sold in the United States by a British company in 1885. When Travelers began to offer employer’s liability insurance, it sent inspectors to manufacturing facilities to evaluate risks and recommend safety procedures. Resistance to precautionary methods was gradually overcome when shop owners found that their insurance premiums were lower when they followed basic safety procedures. In 1904 the Travelers’s inspection team became a special division, devoted to the elimination of accidents on the job.
In 1897 Travelers wrote its first automobile policy. Early automobile policies were based on the old horse-teams policies. In 1906, however, a new schedule of rates was devised expressly for automobiles based on horsepower.
In 1899 Travelers entered the field of health insurance. The first health policies were not heavily advertised, but were offered to customers who inquired about them. The policies cost $10 a year for an indemnity of $25 per week up to 26 weeks and $2,500 for permanent disability. Initially covering only 15 specified diseases, policies were expanded in the 1920s to include many more ailments, and general health insurance was born.
In 1901 James G. Batterson died, leaving control of the company to Sylvester Dunham. Dunham introduced the branch office system to Travelers. Before 1902 the company’s agents were responsible for selling policies, recruiting agents, and for performing administrative chores. With the opening of its first branch office, in New York City, Travelers set up an administrative system to support the agents, allowing them to concentrate on selling insurance. The branch office serviced existing policyholders, oversaw sales operations, and provided inspection and investigation services. Offices were soon set up in Louisville, Kentucky; Philadelphia, Pennsylvania; and Cleveland, Columbus, Cincinnati, and Toledo, Ohio, and have since grown to number in the hundreds.
In 1903 the first class of 12 agents began training at the industry’s first vocational school, started by Travelers. In 1957 a building was dedicated to an education center, and a dormitory, Denniston Hall, named for the first instructor housed the students.
In the early part of the 20th century Travelers introduced several more new lines of insurance. In 1906 it opened an indemnity department which insured boilers and machinery; in 1911 modern workers’ compensation insurance was added; and in 1915 the indemnity department added burglary insurance. Group insurance, which would later make up a substantial segment of Travelers’s business, was introduced in 1913, written for the employees of the Ohio Electric Railway Company.
During World War I Travelers attracted some of the tens of thousands of men entering the military with special war riders. Many extraordinary claims were paid as a consequence of the war. When the cruiseliner Lusitania was sunk by a German submarine in 1915, 17 Travelers policyholders were killed. The company demanded $426,000 from the German government, but no payment was made. A year later, when a German U-boat, the Deutschland, was picking up supplies in Connecticut, it accidentally rammed an escort tugboat, sending the tugboat’s five-man crew to the ocean floor. The crew had been insured by Travelers’s workers’ compensation insurance, and when the Deutschland docked to inspect its own damage, it was met by a Travelers accident adjuster who served an injunction ordering the German commander to file a bond to secure any future litigation. After the Deutschland posted $500,000 bond, the submarine was allowed to leave.
Sylvester Dunham died in 1915, and was succeeded by Louis F. Butler. Butler was a native of Hartford, born in 1871. He started his career at Travelers as an office boy for J. G. Batterson, and was soon promoted to actuary, and, in 1907, secretary of the company. He became a vice president in 1912, and served as president until his death in 1929, just one week before the stock market crash.
After World War I, in May 1919, the Travelers introduced a comprehensive aviation insurance program which included life, public liability, workers’ compensation, and passenger accident policies. President Woodrow Wilson was among the first group of flyers covered by such insurance. Travelers also published one of the first aviation-safety publications, Airplanes and Safety, in 1920.
When the stock market crashed in 1929, many institutional investors were ruined. Travelers, however, had placed its investment portfolio under the care of L. Edmund Zacher. Zacher, who had become president just two days before the crash, had had the foresight to take Travelers’s money out of equities and put it in United States government bonds, one of the safest investments available.
The company had escaped financial ruin, but suffered a sharp decline in premiums. A number of life insurance policy-holders committed suicide; others threatened to do so if Travelers did not loan them money, which it did not. One such incident occurred in 1933, when a policyholder sent a letter to the company threatening to kill himself unless Travelers agreed to loan him one-third of his policy’s face value for three years at 5%. The letter gave instructions to reply in the public notices section of The New York Times. President Zacher sent the following reply: “Status: Many men are today in equally trying financial circumstances but are giving a brave fight. Your moral support and affection will add more to the happiness of your family than any monetary consideration. Your family would not approve of your proposal. Keep its Respect. Zelevart.” Years later a man in New York City confessed to his agent that he had been inspired by Zacher’s reply and carried on.
During World War II Travelers underwrote a number of extraordinary risks, like munitions, bombers, fighter planes, and submarines. Travelers also underwrote the Alcan highway project, between Fairbanks, Alaska, and Dawson Creek, British Columbia, eventually linking up with the Pan American highway extending south to Rio de Janeiro. Travelers insured a wide variety of industrial risks, including oil fields in Iran and construction sites in South America. Perhaps the riskiest underwriting of all was that of the Manhattan Project, which secretly developed the atomic bomb. This experience led Travelers to participate in insuring nuclear power plants after the war.
In 1945 Jesse W. Randall became president of Travelers Insurance Company. Francis W. Cole became chairman of the whole group, which now included Travelers Indemnity Company, a subsidiary.
After World War II, Americans began to move out of the cities, into the suburbs. Expensive new appliances like TVs, refrigerators, and air conditioners promoted the installment loan. Better highways encouraged greater production of automobiles. These new trends affected Travelers. The company offered packaged insurance plans for individuals. The Extended Coverage Plan and the Additional Extended Coverage Plan offered homeowners protection from more hazards than ever. In 1955 all of a homeowner’s insurance needs—fire, personal liability, windstorm, medical coverage for outsiders injured on the premises, and living expenses when a home becomes uninhabitable—were included in the Homeowners Policy. In 1957 the Premium Budget Plan allowed homeowners to pay monthly premiums.
The increase in automobile use resulted in a large increase in accidents. In the ten years after the war, accidents increased 30%, and the cost of bodily injury claims rose 86%. Travelers began losing money on its automobile liability lines until 1959, when the company began basing insurance rates on a driver’s safety record. Studies had shown a driver with even one accident or traffic violation in the past three years was significantly more likely to have another mishap. With the new rating system, the Travelers was able to make the auto-accident insurance division profitable again.
In 1952 J. Doyle DeWitt became president of Travelers. During DeWitt’s term, group insurance came to play a greater role in the company’s profits. Group major medical, in particular, showed stunning growth during the 1950s and 1960s. In 1958 Travelers opened its first suburban neighborhood branch office, near Atlanta, Georgia. The new neighborhood offices catered to homeowners and people with small businesses. Also in 1958, with business booming, Travelers installed its first computer to help keep up with the paperwork.
During the 1960s Travelers continued to adjust to societal changes. Crime rates continued to increase, as did traffic accidents. Health-care costs were skyrocketing, and court settlements had higher limits. The new Medicare program took a sizable bite out of the company’s health insurance premiums. Travelers lost some ground to other insurance companies. In 1965 Sterling Tooker, the company’s new president, announced Travelers’s intention to respond to the changes that were slowing the company’s growth. Morrison H. Beach was put in charge of developing the company’s long-term planning. The company hired Thomas F. Malone from the Massachusetts Institute of Technology to head a new research department in order to spot trends and help the company respond to them.
At the end of 1965 Travelers Insurance Company reorganized its capital structure, becoming The Travelers Corporation. The new corporation held the stock of Travelers Insurance Company and its former subsidiary, Travelers Indemnity Company. The Travelers Corporation also operated as a reinsurance company. In 1966 Travelers added the Phoenix Insurance Company to its holdings. Phoenix was the 29th-largest U.S. property and casualty insurer.
In 1967 The Travelers entered the mutual funds business when it opened the Travelers Equities Fund. The fund was among the top performers. The company’s diversification served as a buffer in 1968 when property and casualty underwritings lost $64 million.
In 1969 Sterling Tooker resigned as president and CEO of The Travelers Corporation and was succeeded by Roger C. Wilkins. J. Doyle DeWitt remained chairman. Later in the years, The Travelers insured the Apollo II astronauts. By 1970 The Travelers’ premiums had doubled from their 1960 level.
In 1971 Morrison H. Beach became The Travelers’ president and Roger Wilkins became chairman. The Travelers ranked second among diversified financial company in the United States.
During the early 1970s The Travelers began to mass market insurance and financial services to individuals through their employers. This bulk sales method allowed The Travelers to offer lower rates and reduced The Travelers’ processing costs because premiums were often collected through payroll-deduction programs.
In 1974 The Travelers restructured its departments, splitting the property and casualty division along personal and commercial lines. The life, health, and financial-services divisions remained intact. In 1975 the company’s earning dropped to $100 million, from $127 million in 1974. The cyclical nature of property and casualty insurance was responsible. Earnings from the property and casualty lines in 1974 were $32.6 million, down from $89.6 million in 1973. Property and casualty earnings bottomed out at $2 million in 1975 before bouncing back in 1976 and 1977, peaking in 1978.
In 1976 Edward H. Budd became president of The Travelers. Budd had joined the company in 1955 as an actuarial assistant. He became senior vice president in charge of the property and casualty business in 1974. Morrison Beach became chairman, and remained CEO until 1981. Budd replaced Beach as chairman in 1982, at a time when the insurance industry was struggling due to record health-care costs and stiff competition between insurers.
The 1980s were a time of intense competition and deregulation for financial companies. In the early 1980s property and casualty insurers were caught in a downward spiral. Unlike its competitors, Aetna and CIGNA, however, The Travelers was able to escape the worst of the cycle, largely because group-insurance and pension-planning operations continued to grow rapidly. The Travelers acquired or formed a number of new companies to the group during the decade, including Keystone Life Insurance Company, in 1980; Travelers Lloyds Insurance Company, in 1981; Provident Travelers Mortgage Securities Corporation, in 1983; Bankers and Shippers Insurance Company of New York, in 1984; Travelers Keystone Fixed Income Advisors, and Travelers Plan Administrators, in 1985; Whitaker Health Services, in 1986; and Health Plan of Virginia, in 1987. Minority interests in a number of financial companies were also acquired.
In 1982 The Travelers expanded its activities in the securities market when it purchased the clearing unit of Moseley, Hallgarten, Estabrook, and Weeden. In 1986 it became a major player in securities with its $157.5 million purchase of Dillon, Reed & Company, one of Wall Street’s oldest investment-banking firms. The traditional Dillion, Reed gave The Travelers a significant foothold in the rapidly changing securities market.
In January 1985 Alva O. Way, president of The Travelers Corporation since 1983, resigned unexpectedly. Way had come to The Travelers from the American Express Corporation. Edward H. Budd, chairman and CEO, took over as president following the announcement.
The Travelers relied more on mass marketing of its products and services during the 1980s than it had previously. Health-care costs continued to grow in the 1980s. In 1986 and 1987 the company acquired a substantial health-maintennance organization (HMO) from Whittaker Corporation for $48 million. HMOs grew in popularity because they were expected to keep health-care costs down. In 1989, however, the travelers lost about $18 million on its HMOs, and sold five HMOs for $1 each.
In 1987 Travelers suffered a substantial second-quarter loss of $337 million because of doubtful real estate investments it had made in the Southwest. As a result of these real estate investments the company’s securities rating was downgraded. In 1988 Travelers began cost-cutting measures through staff reductions; 465 employees were dismissed, another 420 left voluntarily. A year later 225 more jobs were trimmed.
The Travelers Corporation, always an innovator in the insurance industry, played a crucial role in the widespread acceptance of casualty insurance throughout the United States. The company has also had a hand in developing new forms of coverage, and its progressive posture leads one to believe The Travelers Corporation will continue to adapt successfully to changes in the marketplace.
The Travelers Insurance Company; The Travelers Life and Annuity Co.; The Travelers Life Insurance Company; The Travelers Insurance Company of Illinois; Travelers Life Insurance Company; The Travelers Corporation of Bermuda Ltd.; The Travelers Indemnity Company; The Phoenix Insurance Company; The Charter Oak Fire Insurance Company; The Travelers Indemnity Company of Rhode Island; The Travelers Indemnity Company of America; Constitution State Insurance Company; Travelers Reinsurance Company of Bermuda, Ltd.; Travelers Equities Sales, Inc.; Travelers Investment Company; The Massachusetts Company, Inc.; Travelers Keystone Fixed Income Advisors, Inc.; Travelers Mortgage Securities Corporation; The Prospect-Company; Constitution Plaza Inc.; The Travelers Asset Management International Corporation; Panther Valley, Inc.; Plaza Corporation; Derby Advertising Inc.; Constitution State Service Company; Travelers Marine Corporation; Travelers E.B.S. Inc.; The Travelers Corp. (UK) Ltd.; Travelers Lloyds Insurance Company; Center For Corporate Health Inc.; Travelers Plan Administrators, Inc.; Resource Information Management Systems Inc.; Travtech Inc.; Dillon, Reed and Company, Inc.; Travelers Health Network, Inc.
—Thomas M. Tucker