An abridged history of life insurance

BusinessMirror – An abridged history of life insurance
An abridged history of life
Category: Opinion 09 Dec 2014
Written by Dennis B. Funa
THE first life-insurance company in the world
was the Amicable Society for a Perpetual
Assurance Office. It was established in London,
England, on July 25, 1706, by an act of
Parliament, with the support of the Rev. William
Talbot, then-bishop of Oxford, and Sir Thomas
Allen, a financier. It initially had 2,000 members.
Though the first life-insurance table is attributed
to Edmund Halley, a Londoner who wrote the book Natural and Political
Observations Made Upon the Bills of Mortality in 1662, the formal use of
mathematics and statistics in insurance came about only in the 1750s. In the life
plan first designed by Amicable, policyholders would make annual payments
based on the number of shares possessed (maximum of three) and age,
regardless of health status. At the end of the year, a portion of the annual
payments collected, then called “amicable contributions”, was distributed to the
heirs of the deceased members.
A standing rule of Amicable was to not accept anyone older than 45 years old.
Since a certain James Dodson, a mathematician, was older than 45, his
application with Amicable was rejected. This led Dodson to establish his own
society that would collect premiums based upon the risks assumed, using a
statistical mortality table developed by Halley. He described such arrangement
as “equitable”. Long after Dodson’s death in 1757, his legacy was fortified with
the government’s grant of a charter to The Equitable Life Assurance Society in
1762. Also known as the Society for Equitable Assurances on Lives and
Survivorships, Equitable came to be distinguished as the world’s oldest mutual
insurer. Edward Rowe Mores, its first CEO, would have the honor of carrying the
title “actuary”, the first time the term was used.
Due to competition from Equitable, Amicable revised its premium-setting criteria
to include health and occupation as factors. In 1866 Amicable was sold to the
Norwich Union Life Insurance Society.
BusinessMirror – An abridged history of life insurance
In the United States the first life-insurance company was organized in 1759 by
the Presbyterian Synod of Philadelphia for its ministers and their dependents. It
called this insurance company the Corporation for Relief of Poor and Distressed
Widows and Children of Presbyterian Ministers. The feat was followed by the
Episcopalians a decade later. By the 1830s, almost all life insurers in the US
were mutual ones, with only one life insurer categorized as a stock corporation.
The first chartered (created by law) life-insurance company in the US was the
New England Mutual Life Insurance Co., which was formed in 1835. Founded by
Judge Willard Philips, it was chartered by the state legislature of Massachusetts
and was required a guaranty fund of $100,000. One of the policyholders of New
England was Daniel Webster, a leading senator at the time.
New England’s story holds an important place in the history of life insurance. One
of its employees, Elizur Wright, was recognized for his innovations, which had a
significant impact on life insurance. He created the “Wright’s Tables”, which
estimated the premiums and reserves needed for the sound valuation of a lifeinsurance policy. Wright was also credited for the formulation of life insurance’s
nonforfeiture feature, particularly the cash-surrender value. Prior to his
innovations, a policyholder who is unable to continue payment of his or her
premiums is forced to sell his or her policy for an amount lower than its intended
value, or even not get anything from it. With the cash-value feature, a
policyholder who has diligently paid his or her premiums after a certain number of
years, but then decides to discontinue his or her coverage, is guaranteed to
receive a cash-surrender amount. Aptly, Wright was described by Robert
Ingersoll this way: “When we received our morals from merchants and made
merchandise of our morals, Elizur Wright held principle above profit, and
preserved his manhood at the peril of his life.”
In the Philippines the Lloyd’s of London appointed the Strachman, Murray & Co.
Inc. as its representative in the country during the Spanish colonial era. Officially,
the first life-insurance company in the country was the Sun Life Assurance of
Canada (Sun Life), which set up shop in 1898. During World War II, Sun Life ran
“underground” operations and, after the war, paid out the equivalent of $1.2
million in death claims, $850,000 in mutual-endowment settlements and
$125,000 in cash-surrender value. By November 1946 Sun Life-Philippines was
the mother company’s leading foreign branch, placing third overall in the whole
The first purely domestic life-insurance company in the country was Insular Life
Assurance Co. Ltd., which was established in 1910. To date it has maintained its
stature as the largest, purely Filipino-owned life-insurance company. On the
other hand, the first domestic nonlife-insurance company was the Yek Tong Lin
BusinessMirror – An abridged history of life insurance
(YTL) Fire and Marine Insurance Co., which was established in 1906. It was
founded by Guillermo A. Cu Unjieng (1867 to 1953). YTL will be later known as
the Philippines First Insurance Co. Inc.
It is interesting to note that, though the development of life insurance has been
gradual, it has, nonetheless, been constant. Today life insurance continues to
evolve, widening its reach, not only to the moneyed who are capable to invest in
sizable premiums, but also the working-class members of our society. Without a
doubt, for all the value it gives, what we know for sure is that life insurance is
here to stay.
Atty. Dennis B. Funa is the Insurance Commission’s deputy commissioner for
legal services. Send comments to [email protected]