The Evolution of Insurance and Safety Standards (Part 2)

Is just literally like every time there's a new industrial sector or a new product or a new service, we all go back to Lloyd's of London, which is, we have to share the risk, right? We can't allow a person or a company to be destroyed because of an accident. And it was one new technology in particular that inspired the insurance industry to radically rethink its approach to risk. A new approach that would eventually lead to the destruction lab I visited in South Carolina. Julie says it was toward the tail end of the industrial revolution when the insurance industry started banding together to do its own experimental research to figure out not only how to better price risk, but to find ways to actually reduce it out in the real world. That new technology, Julie explains, was electricity. When electricity went into homes during the Victorian era, the wires were not all that safe. They were cloth wrapped, you know, the switches, the bulbs, everything could explode or overheat and cause fires. And so the engines industry, the underwriters, the people who bear risk, got together and created a laboratory in which they could do testing, rigorous, objective testing of these products. This insurance funded laboratory in Chicago was called Underwriters Laboratories, or UL for short. It started by testing out these new electrical wiring systems to figure out which were more dangerous than others. But they also eventually expanded their mission to include many of the newfangled appliances and products that started to pour onto the market. They wanted to determine which might be likely to electrocute somebody or start a house fire. And if you passed the testing, then UL would put their mark on your product. The UL product mark meant essentially that somebody who is looking out for your safety says this particular thing is safe. Now, insurance companies did not have the power to dictate new safety regulations, but they did have the power to deny coverage to buildings or homes that did not choose UL certified wiring. And they could convince mega retailers like Sears to use UL safety mark to decide in part which electronics and appliances to stock. And in fact, to this day, if you look at the electronics around your house, odds are high that hidden somewhere near the serial number, you'll still be able to find this little circle with the letters UL inside of it. For Underwriters laboratories, meaning this private industry group has been able to exert influence over infrastructural and consumer standards you might usually associate with the government. So that was one of the.