ABSTRACT
In 1927 Samuel P. Black, Jr. joined the newly formed property and casualty insurer, Erie Insurance, as its claims manager. The survival of Erie Insurance was, in 1927, hardly a foregone conclusion, because "it is generally accepted that failure rates are extremely high" for new firms. In the case of the Erie Insurance Exchange, H. O. Hirt and Ollie Crawford chose to incorporate a Pennsylvania corporation, the Erie Indemnity Company, as the manager of the Erie Insurance Exchange. The Erie Indemnity Company, for example, charged a management fee of 25 percent of the premiums for its services as the manager of Erie Insurance Exchange. This became the overhead that Erie Indemnity used to run and manage the insurance business of the Exchange, and to pay its stockholders dividends. To organize Erie Insurance Exchange Hirt and Crawford had to raise $25,000 for the company's reserve fund, along with some operating capital.
