In the mid-19th century, the retail lumber industry grew in the Eastern United States. Sawmills moved from the logging camps to the waterfronts of American cities, and retail lumberyards sprang up in the developing residential areas of these cities. With this development and the growing complexity in the process of timbering, insurance became essential for lumbermen.
In 1886, a group of prominent lumbermen formed The Lumber Merchants Exchange of Philadelphia (later shortened to The Lumbermens Exchange), a buying cooperative to reduce expenses, increase buying power and share information and services.
To achieve these goals, the group established an Insurance Committee in 1894, headed by Edward F. Henson, a young lumber executive and attorney, to investigate the high rates charged by stock insurance companies. In February 1895, the Committee under Henson’s leadership, founded Pennsylvania Lumbermens Mutual Fire Insurance Company (later called PLM).
It was fitting that the birthplace of mutual insurance where Benjamin Franklin formed the first insurance company in America, The Philadelphia Contributionship, was now the birthplace of one of the first Lumber Mutuals.
In addition to PLM, other lumber mutual fire insurance companies were established in New York and Massachusetts. Lumber mutuals flourished in the first half of the 20th century as the industry continued to boom and losses remained low.
When competition tightened from their stock competitors, the lumber mutuals began to branch out geographically and market-wise. Eventually over the next 40 years, they succumbed to declining profitability.