The History of Life Insurance

You probably think of life insurance as a relatively recent thing, maybe originating in the last hundred years or so.  The roots of life insurance, however, go back to the time of Ancient Rome.

Around 100 BC, a Roman general named Caius Marius came up with a “burial club” for his soldiers.  Believing that improper burials would lead to disgruntled spirits, other Romans liked the idea and ran with the idea.  Down the road, the clubs started including money to be paid to the survivors of the deceased.  Sound familiar?

After the fall of the Roman Empire around 450 AD the burial clubs ceased to exist.  It wasn’t until over a millennium later when any kind of insurance began to appear.  Lloyd’s of London began as Edward Lloyd’s Coffee House.  It was a popular gather place for nautical professionals, so to speak: ship captains, ship owners and merchants would meet at Lloyd’s for the latest shipping news.  Marine insurance came from that, and in 1769 professional underwriters established New Lloyd’s Coffee House, and that eventually became famed insurer Lloyd’s of London.

In between the founding and morphing of Lloyd’s, another Londoner, a draper by the name of John Graunt, discovered patterns of longevity and death in defined groups of people in 1662.  A generation later in 1693, the first mortality table linking life insurance and average lifespans was developed by astronomer Edmond Halley.

A few years later and an ocean away, the first insurance company in America was established in Charleston, SC in 1732, though life insurance wasn’t available until 1760.  That, though, followed the Presbyterian Synod of Philadelphia, which created life insurance for Presbyterian ministers and their dependents in 1759.

Life insurance took off in the 19th century.  The Panic of 1837, increased legal rights for women and cultural shifts that didn’t see life insurance as a form of gambling led to a shift towards mutualized life insurance.  By 1850 there was one stock-based life insurance, but there were 17 mutuals, including a number of current prominent life insurance firms.

Life insurance companies hit a big setback during the depression of the first half of the 1870’s.  46 of them stopped operations while 32 failed completely.  Policyholders lost $35 million, which, adjusted for inflation, is over $760 million in 2015 dollars.

1875 saw an important change, however.  That’s the year that burial insurance became available to to working class through New Jersey’s Widows and Orphans Friendly Society.  You might know them today as Prudential.

Group life insurance first became available when Equitable Life Insurance Society covered all 125 employees at the Pantasote Leather Company without requiring medical exams or individual applications.  The following year they started insuring Montgomery Ward employees.

By the time the Great Depression rolled around there were over 120 million life insurance policies in America, which was roughly the population of the country.  In 1976, 90{66506b27ca8f5234034d808fc0aabc14bc16ceb45d71027974b073b60f711cfe} of traditional families and 72{66506b27ca8f5234034d808fc0aabc14bc16ceb45d71027974b073b60f711cfe} of all adults had life insurance.  As of 2010, about 30{66506b27ca8f5234034d808fc0aabc14bc16ceb45d71027974b073b60f711cfe} of US households had no life insurance, a 50-year low.

Leave a Reply