Entry at Lloyd's and early innovations 1878–1905
In 1878, at the age of 18, Heath became a clerk at Henry Head & Co., a firm of brokers and underwriters at Lloyd's of London. In 1880, at the age of 21, he was elected an underwriting member of Lloyd's, with the backing of a £7,000 deposit provided by his father, and he began underwriting for himself two years later, in 1882.
Lloyd's at the time was a marine insurance-only insurer, so Heath was a marine underwriter at first. In 1885 he reinsured Hand in Hand Fire & Life Insurance Society's fire risks, thereby reviving fire insurance at Lloyd's, which had previously been discontinued due to high taxation rates. He started Lloyd's first specifically non-marine syndicate at Lloyd's in 1885. Heath thereafter became renowned for increasing, and innovating in, Lloyd's non-marine insurance business, which eventually resulted in changing the face of Lloyd's forever.
Heath's innovations in the insurance industry began in the late 1880s. By 1889 someone insuring a house for fire had asked Heath if he could also insure it for burglary, which had never been done before. Heath's reply was reportedly a now-famous "Why not?", which became his motto going forward; his principle was "Any risk is insurable at the right price." Around the same time he also began insuring the diamond market, resulting in his creating a "jeweller's block" policy for merchants that covered jewels in transit and on the premises, and an "all risks" jewellery policy for consumers that covered loss or theft.
In the late 1880s Heath also invented and offered insurance for loss of profits after a fire, also known as business interruption insurance. This controversial move created a major uproar, and he was summoned by the Chairman of Lloyd's Fire Offices Committee and asked why he was "ruining fire insurance". Heath ignored the controversy.
In 1890, in order to increase his business Heath established a firm of insurance brokers, C. E. Heath & Co., which became a substantial independent broking firm with considerable overseas business. In 1890 Heath also wrote the first American risk ever in Lloyd's non-marine market. In 1895 he wrote the first earthquake insurance policy in the U.S. Heath also invented bankers' blanket bond insurance.
Heath was the first Lloyd's underwriter to accumulate detailed probability-of-loss statistics, becoming a specialist in the risks he undertook. In order to price catastrophe insurance, he initially collected maps of 100 years of hurricane paths in the West Indies, and made detailed notes in a little black rating book which acquired renown. He did the same for earthquakes, paying to have maps created of past earthquakes in India, and finding records of past earthquakes in South America, China, and the West Indies. He also lent his black book to competitors so they would not naively undercut his rates.
In the 1890s Heath also developed credit risk insurance, with the stipulation that the insured had to bear some part of the risk in order to insure prudence and due diligence on the part of the creditor. He established the "8 Principles of Credit Insurance", became the first Chairman of the Trade Indemnity Company, and founded the Credit Insurance Association. He also pioneered employer's liability insurance and workers' compensation insurance.
In 1894, faced with a need for greater capacity for his non-marine insurance business, Heath established the Excess Insurance Company. With an initial capitalisation of £5,000, it was used as a reinsurance backing for his syndicate. The original stated purpose of the firm was "to write marine, fire and accident [liability] business and reinsurance".
During the 1901–1902 smallpox epidemic in London, he pioneered smallpox insurance, reducing the premium by 75% if the individual was vaccinated.
Prior to the 20th century Lloyd's only secured its marine insurance risks. In 1902 Heath finally persuaded Lloyd's to require security deposits for non-marine business as well; this was implemented in 1903. Heath was also the first to introduce the idea of an audit at Lloyd's; because of the dearth of security for non-marine risks, he required a strict audit of the members of his syndicate, beginning in 1903.
