Tom F. Peters on insuring against risk

    The less time you are exposed to harm, the lower your risk. The lower the risk, the smaller the cost of insuring against it. The same principle is partly the reason for building the Suez Canal. Hear Tom F. Peters, Swiss-educated historian of technology:

No development runs rigidly in a single direction. The great projects of the age [the 19th century] were more risky than we now perceive them to have been. An example is the interdependence between profit, insurance, and iron construction in shipbuilding, which shows how complex the considerations were that faced the Suez Canal’s promoters and potential users. The quicker the transportation was, the shorter the trips would be. This made insurance risks lower, because the less time a ship spent at sea, the smaller the danger of shipwreck, piracy, or fire. One of the main arguments in support of the canal was therefore that it would save about 2 percent of a standard insurance premium on traffic to the Orient. Since profit margins lay around 12 percent at the time, even slight savings on insurance premiums made a difference, especially since a shorter trip also meant that the merchant could reinvest profits more promptly. Insurance considerations also led merchants to choose iron as an incombustible structural material. (Quoted from page 19 of Building the Nineteenth Century, by Tom F. Peters. 1996. Cambridge, Mass.: The MIT Press.)