Loyal Auto Insurance, the first Black-owned auto insurance company in the U.S., was born from wartime discrimination and community fundraising in the 1950s. Its story is a fascinating fragment of how race and insurance intersected in mid-century America.
By James Lynch
It’s almost always sunny in Los Angeles, but Feb. 20, 1950, must have felt particularly bright for the group assembled around the Ford Super Deluxe parked at the curb of the insurance and real estate offices of Wendell E. Larson. The group was celebrating the first policy issued by Loyal Automobile Insurance, the first Black auto insurance company.
It had been quite the journey for Loyal, which was born of discriminatory practices during World War II and nurtured through years of fundraising. But now the dream was alive, as company President Larson handed the first policy to Loyal’s first agent, Ruby J. Braxton. A cluster of Loyal employees and well-wishers completed the tableau, the moment documented in a three-column photo published in the California Eagle newspaper.[1]
A Complex Intersection of Race, Insurance, and Market Forces
Although Loyal started small and never grew to be a large company, its story is a fascinating fragment of how race and insurance intersected in mid-century America. It ultimately succumbed in a typical way to typical market forces, though these were shaped by the reality of the Black marketplace. The idea for Loyal emerged when World War II interrupted America’s well-established love affair with automobiles. Almost immediately, auto factories became war factories, making jeeps and ambulances for the government. Next came rationing—gasoline, sugar and meat—but more important for this story, steel and rubber. The materials that made cars and parts now made tanks and battleships.
The result: a nationwide shortage of raw materials. The price of auto parts shot upward.
Insurers responded by tightening their underwriting criteria. Black persons were systematically dropped, according to subsequent accounts in the Black press. By 1946, an estimated 90,000 Black car owners in California were unable to obtain insurance.[2]
Discrimination is an ugly obstacle to its victims. But Black Americans had maneuvered through it before.
At the start of the 20th century, most well-known life insurers, unable to charge Black customers more for insurance, simply stopped writing them. Black entrepreneurs started their own companies. They hired Black underwriters, agents, and actuaries—all barred from positions at other companies. By 1946, Black life insurers had nearly 9 million policies in force and employed more than 10,000 people.[3]
A Black-owned auto insurer would seem like a similar response.
However, there was one twist for Loyal. The company’s president, Larson, was a white man, a Stanford graduate, and a 30-year insurance veteran. But the other executives, the employees and, most important, the customers would be Black.[4]
That was the dream. But the organizers didn’t have the dollars.
Before an insurer can underwrite, it needs capital—a financial cushion to absorb potential losses if results are worse than expected. In July 1946, Loyal received permission from California’s insurance commissioner to raise $450,000—about $7 million today—by selling up to 150,000 shares at $3 per share, with underwriting to commence soon after.[5]
Usually, insurance companies raise capital quietly. Would-be executives solicit the wealthy at the club or on the fairways, promising a lucrative home for excess millions.
Loyal took a different route.
It began with a huge to-do at the Alpha Bowling Social Club Auditorium in Los Angeles, with coverage splashed across a pageful of photos in the Nov. 28, 1946, California Eagle newspaper. In the centermost photo, musician Carl L. Jones sits on an ornate sofa in his pinstripe suit and polka-dot tie. His wife sits next to him. They are both beaming.
They are at a party to sell stock in Loyal Insurance.
Jones is the lead tenor of the nationally known Delta River Boys. (They’d been on Broadway! And the movies! And Amos ’n’ Andy!)
He is listening to Priscilla Royster, singing solo with Marquee’s Rockettes. Years later, Royster would move to Canada, sing the blues as Jodie Drake and earn a spot in the New Orleans Jazz Hall of Fame.
In another photo, Joseph W. Rideau, a gas station owner, is signing the paperwork to buy a block of Loyal Insurance stock, glancing at the camera with Loyal sales agent Helen Johnson at his left elbow.
Also present, of course is Larson, perhaps the only white person in the room. His double-breasted jacket is open and unbuttoned, unlike other folks, his loud tie ending well above the waistband—not nearly as sharp as the Joneses or the other attendees. Even Rideau, the gas station owner, is better-dressed.
It must have been quite a party, but for Loyal, it was a failure. A month later, the company announced it had reduced the minimum share purchase to 10 from 35, reducing the minimum investment to $30. The official reason was “in order to serve the entire community,” but were sales brisk, it seems unlikely the step would have been considered.[6]
Organizers were undeterred. They met regularly—most often at Los Angeles area churches.[7] The church settings and the gospel music would not have seemed out of place for an insurance organization. Black life insurers got their start as successors to burial societies from the late 1800s, many of them faith-based.[8]
Loyal also appealed directly via the media. Chief publicist Paul D. Davis wrote a four-part series for the California Eagle, extolling “The Future Of The Negro In The ‘Non-Life’ Insurance Field.”
Davis wrote that the marketplace was ready for a Black automobile insurer. He pointed to the success of Black life insurers; the higher rates that Black persons paid for auto insurance; the jobs the insurer would create for Black persons; a new state requirement for auto liability coverage; and the qualifications of Loyal’s management. [9]
By this time the offer price had been trimmed by a third, to $2 a share.[10] Loyal petitioned the state, which reduced the capital requirement by more than half, to $200,000.[11]
In the end it was a would-be Loyal director, John A. Hutcherson, who bought the remaining $62,000 worth of shares outstanding in late November 1949. It was his 48th purchase of Loyal stock. He contributed $77,078, or more than one-third of Loyal’s capital. He had also purchased newspaper advertisements, paid for photographers, and funded travel in connection with the stock drive. He became Loyal’s first secretary-treasurer.[12]
Loyal wrote $127,000 that first year, the tiniest sliver of the $128 million in physical damage coverage written in California in 1950. Earned premium barely capped $35,000, indicating most of the business was written in the second half of the year. It charged manual rates, offering discounts of as much as 10 percent for the best risks and surcharging up to 50 percent against the worst.[13]
The company posted an 85 percent loss and loss adjustment expense ratio, significantly worse than the countrywide industry average, 47 percent. Its combined ratio was 165, also much worse than the industry’s 82.[14]
The weak results, particularly the high loss ratio, weren’t a surprise. People shopping for insurance are usually drivers whose rates are rising because they were in an accident or drove poorly. Loyal was likely selecting from a suboptimal pool of drivers, the best Black drivers likely having no reason to look for a new policy.
The resulting $97,000 underwriting loss bit hard into the $220,000 capital and surplus with which Loyal began. A.M. Best shows a new $24,000 capital contribution during the year, but Loyal’s financial cushion was thin, given:
- The state had initially required $450,000 in capital and surplus.
- That amount had been cut by more than half to get the company off the ground.
- The first year had burned through almost half the reduced requirement.
- The company had no reinsurance.
Results the next year, 1951, were worse. Writings grew 72 percent, to $219,000. The loss ratio deteriorated slightly, to 88 percent, but underwriting expenses soared, pushing the combined ratio to 190.
Hopeful Signs
There was some good news. Lloyd’s of London came on to provide reinsurance—a 75 percent quota share that gave the company room to grow. And Loyal expanded. It began to write other minorities.[15]
Still, more change was needed.
New investors, who came to be known as the Jackson Group, took control in October. The Jacksons were a Black family with a Michigan dairy business.
Gone was president Larson. In his place was Charles E. Maxey, a professor of production management at Atlanta University.[16] Maxey’s chief insurance achievement was helping organize and acting as secretary for Southeastern Fidelity Fire Insurance Company, a Black-owned property-casualty insurer.
Southeastern Fidelity can credibly claim to be the second Black auto insurer. The company was formed in 1949 after a stock sale brought $200,000 in capital and surplus. It began writing business on Jan. 4, 1950, about a month before Loyal. (Note how quickly organizers raised capital and began writing.)
Southeastern Fidelity earned $28,112 in auto premium in 1950, marginally less than Loyal that year. Auto was only 28 percent of Southeastern Fidelity’s overall book—the rest being fire and extended coverages. We don’t know whether the January business was auto.[17]
Loyal has the stronger claim to being first. It originated and raised money for years before Southeastern Fidelity formed. The Associated Negro Press published a story about Loyal’s first policy, and newspapers across the country picked it up. Southeastern Fidelity never received that accolade in contemporary accounts.[18]
Through his role at Southeastern Fidelity, Loyal’s new president had a property/casualty background. It is, however, not clear how much insurance acumen he possessed. Maxey received degrees from Morehouse Harvard in production management. A typical course he taught in 1948 covered topics such as “time study, methods work, blue printing and plant layout.”[19]
In his brief time as Southeastern Fidelity’s secretary, Maxey would not have had much exposure to the core insurance processes of underwriting, claims and investment. He was the only officer of Southeastern who was not a director.[20]
Maxey moved to Los Angeles in 1951 and soon hired his younger brother, William—fresh off a master’s in business at Columbia University—as company secretary.[21]
Results quickly improved. In 1952, direct written premiums nearly tripled. The combined ratio remained higher than the industry composite, 112 vs. 90, but the gap was closing.
But by the end of 1952, the Maxey brothers were out. Best Insurance Reports shows the owners, the Jackson family, had moved to Los Angeles; Thomas J. Jackson took William Maxey’s place as president. J. Rosenwald Jackson became vice president and treasurer.
The reasons for the Maxeys’ dismissal only became public in May 1954, when a photographer caught Charles Maxey, slender and stylish in a light-colored, tailored suit and white boater as he emerged from City Jail after posting $2,500 bond. It was published on Page One of the Los Angeles Tribune under the headline, “Harvard-Trained Insuranceman Jailed for Theft,” and a subhead, “Dapper Harvardman Leaves ‘Hoosegow.’”[22]
The Maxeys were convicted of stealing, according to press accounts, $12,000 from the company.[23] They were sentenced in 1955 to six months in jail and seven years’ probation. They agreed to repay the insurer for the thefts.[24]
Both men left insurance, Charles Maxey to teach professional courses and work at a job training institute; William to operate a business in Beverly Hills.[25]
With the Maxeys’ exit, Loyal entered a profitable phase. In 1953, the combined ratio fell near breakeven, to 102. The underwriting loss was more than offset by investment gains on the company’s portfolio.
The following year, Loyal posted its first underwriting profit, and direct written premiums exceeded $1 million for the first time. And 1955 was even better. In both years, the combined ratio was terrific—under 80, much better than the industry average.
It was Loyal’s high-water mark. The company was small, still well under 1 percent of the California physical damage market, but it held a profitable book as well as prospects for growth. Loyal was poised to realize at least some of the promise that beckoned its organizers a decade earlier.
But problems lay ahead.
Overleverages and Commissions
The reinsurance market was souring on Loyal. The 75 percent quota share with Lloyd’s ended on Jan. 1, 1954. General Reinsurance stepped in, but reinsured only 50 percent of the book. Loyal’s share rose from 25 percent to 50 percent, essentially doubling its exposure without a commensurate increase in capital and surplus.
Reinsurance acted as a governor on how much Loyal could write. To keep from being overleveraged, at year-end, Loyal ceded $150,850 of unearned premiums—more than 40 percent of what General Reinsurance hadn’t taken—to a Texas insurer, Southwest General Insurance Company.[26]
The lifeline only lasted one year. At the end of 1956, more than $200,000 in unearned premium fell onto its books.[27]
Loyal was overleveraged.
A.M. Best summarized the situation dryly: “Underwriting commitments are unusually large in relation to free resources available to meet contingencies.”[28]
Beyond that, a long-term issue loomed: commissions. The details aren’t immediately clear, but Loyal paid contingent commissions high enough to entice agents to send them profitable business—but so high that they likely cost the company more than they saved in claims.
Only the prosperous underwriting environment kept the company healthy.
That was changing, too. The reason was chrome.
Automakers adopted chrome in the 1920s, but then it was used judiciously, a filament of ornamentation on a plainer automobile. In the 1950s, the shiny metal became ubiquitous, a sign of postwar American wealth and opulence. “Chrome on a car is the automotive equivalent of using jewelry on an outfit,” automotive museum curator Leslie Kendall told CNN last year.[29]
If so, 1950s cars were red-carpet starlets, draped and bathed in the shiny metal. Playing up the bling were bigger windshields, contoured and tinted.
In an accident, these things had to be replaced or fixed.
The industry loss and loss adjustment expense ratio was 50 percent in 1954 but crept higher every year, thanks to the chrome-infused repair costs—54 percent in 1955, 64 percent in 1956 and 67 percent in 1957. The wave caught Loyal, too: the loss and LAE ratio rose from 46 percent in 1954 to 57 percent two years later.
It’s a bit much to say Loyal perished on a bed of chrome. Each year the company outperformed the industry loss ratio. But between the deteriorating loss ratio and the bloated commissions, it couldn’t drive much profit to surplus.
Things began to fall apart. It is difficult to reconstruct Loyal’s results for 1957 and 1958. Exhibits in the 1958 and 1962 Best’s Insurance Reports conflict.[30] It is possible that Loyal restated results.
A.M. Best affirmed Loyal’s B rating in 1958, but Loyal missed A.M. Best’s 1959 publication deadlines. The agency’s 1959 report repeated the entry it had published a year earlier. Until Best’s 1962 book, any table calling for 1958 results included this line: “Statement figures not received.”[31]
The California Insurance Department’s 1958 annual report indicates Loyal wrote $1.475 million in direct premiums, 59 percent more than a year earlier. The direct loss ratio, excluding loss adjustment expenses, rose eight percentage points, to 55 percent.
Also that year, unearned premiums rose by $400,000—enough to drive capital and surplus $142,314 below zero.
Loyal was technically insolvent.
A Buyer Emerges
Most in Los Angeles’ Black community first heard about the accounting firm of Beigner, Temkin, Ziskin and Associates in the July 17, 1959, Los Angeles Tribune article “Charge whites taking over Negro insurance firm.”
A week earlier, Loyal’s board had agreed to turn control of the company over to the accountancy in return for a cash infusion. Shareholders approved the deal.
But soon afterward a substantial minority said they had been hoodwinked. They said Loyal director (and life insurance executive) Norman O. Houston told them the Department of Insurance would take over the company in a few days were the deal not approved.
Houston defended himself. Yes, he had said regulators had the right to take over at any time, as is the case with any company in Loyal’s condition, but he hadn’t announced any timetable. [32]
The deal, according to A.M. Best, included a combination of company stock purchases, other surplus contributions, and a sale of debenture notes that Loyal had to repay out of profits at 5.5 percent interest.
The company emerged with about $400,000 in capital and surplus, about twice what it had been able to muster in the 15 years it was controlled by Black persons. [33] This allowed it to shun the reinsurance markets and keep all profits—after the company paid off the new owners’ debentures.
Key Black persons at the company remained in place, in particular Thomas Jackson, the company president. But control passed to board chairman Marvin Kratter, a bald, white New York real estate man perhaps best remembered for tearing down Ebbets Field, once home of the Brooklyn Dodgers.[34]
Kratter was the money behind the accounting firm. He stayed as chairman for a year, to be succeed by accountant George R. Beidner.
The reconstituted Loyal started quite profitable. In 1959, the company had $162,152 in underwriting gains. The larger surplus and the ability to hold all premium dollars net increased investment income to $17,556. In 1960, underwriting profits approached $200,000; investment income topped $32,000; capital gains surpassed $39,000.[35]
The competitive landscape was shifting, too. Traditional insurance companies slowly began to accept Black customers as the Black middle class expanded, eroding Loyal’s market advantage.
Loyal never achieved what its founders envisioned, though it came surprisingly close. In its most competitive years, 1954 to 1963, its loss and LAE ratio was barely higher than what was posted by all stock companies writing physical damage—64 percent to 62 percent. But its expense ratio, driven by the commission structure, was untenable—10 percentage points higher than the industry. That and the constant scramble for capital doomed it.
Loyal remains a landmark of Black insurance entrepreneurship. Its story reflects the challenges of running a business that requires a cushion of wealth when society has made it difficult to accumulate that wealth.
The insurance market turned for Loyal in 1961 as the company posted an underwriting loss of $108,000 that year and $74,000 the next.[36]
That’s when management appears to have decided to leave the business. During 1962, Loyal paid off the debentures used to bail it out in 1959 and moved approximately $300,000 from bonds and about $140,000 from cash into stocks.[37]
The movement from cash and bonds into stocks would seem to be questionable for a company writing a short-tailed line like auto physical damage, where liquidity is critical.
Oscar E. Chambers of Pine Bluff, Arkansas, bought the company in January 1963 and cleaned out what was left of the investment portfolio. Loyal wrote auto business through the end of 1963 at a slight loss.
During the year all of the stock and most of the bonds were sold. The company was sold again in 1965 and liquidated that March. The white buyers appear to have determined they had gotten all they could from the enterprise.
They had made their dollars. They didn’t need the dream.
Reflecting on the journey of Loyal Auto Insurance, we recognize the resilience and determination of its founders in confronting systemic barriers. Their efforts not only provided essential services to underserved communities but also laid the groundwork for future endeavors in minority-owned businesses. Today, as we continue to address disparities in various industries, Loyal’s story serves as a reminder of the progress achieved and the work that remains.
In examining the legacy of Loyal Auto Insurance, we see a testament to the power of community-driven initiatives. The company’s establishment in the face of adversity highlights the importance of representation and equity in all sectors. As we move forward, honoring such stories can inspire current and future leaders to champion inclusivity and innovation and make the dream a reality.
James Lynch, MAAA, FCAS, is a retired property/casualty actuary in New Jersey who writes articles on insurance history and financial matters.
Endnotes
“First Policy,” California Eagle, Feb. 23, 1950, p. 9. Curiously, the actual customer, Mrs. Alma Juanita Topps, is not present.
“L.A. Negro Businessmen Enter Auto Insurance Field; Launch Campaign to Sell Securities,” California Eagle, Aug. 1, 1946, p. 7.
“Negro Insurance Worth 70 Million,” Los Angeles Sentinel, June 27, 1946, p. 24.
“Loyal Automobile Ins. Co. Granted Stock Selling Permit,” Underwriters’ Report, July 18, 1946.
“Loyal Automobile Ins. Co. Granted Stock Selling Permit,” Underwriters’ Report, July 18, 1946.
“Size of Stock Purchases to Broaden Sales in Community,” California Eagle, Dec. 12, 1946,
p. 3.
“Auto Insurance Co. to Meet Monthly,” Los Angeles Sentinel, Dec. 25, 1947, p. 15.
C.A. Spencer, “Black Benevolent Societies and the Development of Black Insurance Companies in Alabama,” Clark Atlanta University Phylon, Vol 46, No. 3 (3rd quarter 1985), pp. 251-261.
Paul D. Davis, “The Future of the Negro In the Non-Life Insurance Field: Part IV. How a Non-Life Insurance Company Operates, Serves and the Profit Motive,” California Eagle, April 21, 1949, p. 5.
“First General Insurance Co. Organized by Race in Calif.,” New Pittsburgh Courier, February 18, 1950, p. 3.
“Loyal Automobile Insurance Company Nears Stock Goal,” California Eagle, March 10, 1949, p. 15.
“J.A. Hutcherson Finances L.A.I.C,” California Eagle, Feb. 2, 1950, p. 17.
Loyal Automobile Insurance Company entry, Best’s Insurance Reports – Fire and Casualty, Alfred M. Best Co., New York, 1951, p. 324.
Throughout this article, quantitative data come from the Loyal Automobile Insurance Company entries in Best’s Insurance Reports from 1951 through 1962 as well as California Department of Insurance annual reports from the same period.
Loyal Automobile Insurance Company entry, Best’s Insurance Reports – Fire and Casualty, Alfred M. Best Co., New York, 1952, p. 324.
Atlanta University eventually merged with Clark University and is now known as Clark Atlanta University.
Southeastern Fidelity Fire Insurance Company entry, Best’s Insurance Reports – Fire and Casualty, Alfred M. Best Co., New York, 1951,
p. 547.
See for example, “First General Insurance Co. Organized by Race in Calif.,” New Pittsburgh Courier, Feb. 18, 1950, p. 3.
“Atlanta U. Offers Course In Production Management,” The Miami (Florida) Times, Oct. 23, 1948, p. 3.
Southeastern Fidelity Fire Insurance Company entry, Best’s Insurance Reports – Fire and Casualty, Alfred M. Best Co., New York, 1951,
p. 547.
Untitled brief, Brooklyn Eagle, Feb. 9, 1951, p. 7.
“Harvard-Trained Insuranceman Jailed for Theft,” Los Angeles Tribune, May 7, 1954, p. 1.
“6 Months for Crash Racket,” Los Angeles Mirror, Feb. 12, 1955, p. 4.
“Insurance Official Who Looted Own Company Sentenced,” The San Bernardino County (Calif.) Sun, Feb. 12, 1955, p. 1.
“OIC resumes training, placing of job-seekers,” Southwestern Sun (Los Angeles), May 16, 1968, p. 2; William M. Maxey obituary, Los Angeles Times, May 30, 2010, p. 36.
Loyal Automobile Insurance Company entry, Best’s Insurance Reports – Fire and Casualty, Alfred M. Best Co., New York, 1956, p. 612.
Loyal Automobile Insurance Company entry, Best’s Insurance Reports – Fire and Casualty, Alfred M. Best Co., New York, 1956, p. 610.
Ibid.
Peter Valdes-Dapena, “Maker of Jeep and Dodge plans to kill chrome on cars, citing risks to those who make it,” CNN.com, June 14, 2024, https://www.cnn.com/2024/06/14/cars/chrome-cars-stellantis-jeep-volkswagen-vw/index.html
Loyal Automobile Insurance Company entry, Best’s Insurance Reports – Fire and Casualty, Alfred M. Best Co., New York, 1958, p. 600; Loyal Automobile Insurance Company entry, Best’s Insurance Reports – Fire and Casualty, Alfred M. Best Co., New York, 1960, p. 601.
Loyal Automobile Insurance Company entry, Best’s Insurance Reports – Fire and Casualty, Alfred M. Best Co., New York, 1960, p. 601.
“Charge whites taking over Negro insurance firm,” Los Angeles Tribune, July 17, 1959, p. 2.
Technically the debentures were considered a special reserve on the company’s books, separate from capital and surplus. But they were still considered a financial cushion in much the same way.
Nick Ravo, “Marvin Kratter, 84; Once Owned Ebbets Field,” The New York Times, Dec. 9, 1999, p. 43. Kratter also bought the Boston Celtics, his obituary says to boost sales of Knickerbocker Beer, whose brewery he owned. If true, this might be the worst idea ever. The brewery was eventually razed to build more apartments.
Loyal Automobile Insurance Company entry, Best’s Insurance Reports – Fire and Casualty, Alfred M. Best Co., New York, 1960, p. 601; Loyal Automobile Insurance Company entry, Best’s Insurance Reports – Fire and Casualty, Alfred M. Best Co., New York, 1961, p. 621.
Loyal Automobile Insurance Company entry, Best’s Insurance Reports – Fire and Casualty, Alfred M. Best Co., New York, 1960, p. 644.
California Department of Insurance annual reports, 1962, 1963, 1964.