The History of Modern Life Insurance

The History of Modern Life Insurance

1583 England: first life insurance contract issued to cover the life of Mr.

Williams Gybbons for one year against

 a premium of 32 Sterling

Pounds. He died the same year and although the company tried to

forfeit the contract, his dependants received a lump sum of 400 Sterling

Pounds.

1689 France: Lorenzo Tonti, a Napolitan banker, proposed an annuity

scheme to Cardinal Mazarin, the Prime Minister of Louis XIV. Under

a Tontine, the Government paid interest on money raised and the total

amount accumulated were divided among the surviving members of the

group at a predetermined date. The Tontines brought an element of

gambling into the purchase of life annuities.

1698 England: establishment of the Mercer's Guild of Cheapside which

began granting annuities to the beneficiaries named by the insureds.

1699 England: establishment ofthe first mutual company by Mr. Standfield

known as The Society of Assurance for Widows and Orphans.

1706 England: establishment of the. Amicable Society for a Perpetual

Assurance Office.

The History of Modern Life Insurance

1756 England: establishment of the Society for Equitable Assurances for

Lives and Survivorships which became the Old Equitable Life

Insurance Company.

1759 United States: establishment of the Presbyterian Synod of

Philadelphia, probably the first type of life insurance company.

1807 United States: in Philadelphia, Israel Whelen opened an agency of the

Pelican Life Insurance Company of London.

1812 United States: The Pennsylvania Company for Insurance on Lives and

Gmnting Annuities is often considered as the first national modem life

insurance company.

Reinsurance

In a book entitled "Die Praxis der Riickversicherung" by Gustav Gruciger,

published in Munich in 1926, an account is given of a marine reinsurance

having been effected in the year 1370, under which the original insurer who bad

issued a policy for a voyage from Genoa to Sluys, reinsured what was

considered the most hazardous part of the risk, i.e. the portion of the voyage

from Cadiz to Sluys.

The first recorded fire reinsurance transaction dates from 1813 and involved

a company in the United States, The Eagle Fire Insurance Company of New

York. Treaty reinsurance was virtually unknown before the nineteenth century

and facultative reinsurance was the sole method used. The term facultative is

derived from the french word "facultatif" meaning ·optional". The earliest

recorded treaty was entered into between European companies in 1821.

The first professional reinsurer appears to be the Cologne Reinsurance

Company established in Germany in 1852. Within ten years, three other

German reinsurance companies were formed and in 1863, the first reinsurance

office in Switzerland was organized, the Swiss Reinsurance Company. England

had no professional reinsurer until 1907.

The Demand for Insurance Regulation

Early insurance regulation reflected political patterns that persisted well into the

twentieth century. The first law in the State of New York, in 1814, was entitled

" An Act to Prevent Foreigners from Becoming Insurers in Certain Cases in this

State.·

The first important wave of regulation targeted the insolvency problem by

requiring that insurance companies file reports of their fmancial status. The

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State of Massachusetts required some reports as early as 1799 and New York

adopted a reporting law in 1828. Reporting requirements had little impact on

the solvency of insurance companies and failure of insurance companies gave

rise to a demand for administrative regulation.S

Elizur Wright, often called the father of insurance regulation, lobbied the

Massachusetts legislature to require that life insurance companies maintain

policy reserves. He became the first Insurance Commissioner after the state of

Massachusetts created an Insurance Board in 1855. The first Insurance Board

was actually established in New Hampshire in 1851.

In 1871, the National Insurance Convention of Insurance Commissioners

was formed and under the direction of New York Superintendent of Insurance

George Miller, the first convention agreed to adopt a uniform annual statement

form. In its second session, the NIC drafted a model law on insurance

regulation. The status of insurance regulation in property and casualty insurance

at the tum of the century was still rudimentary. Most insurance commissions

were small. Insurance regulation focussed on reporting requirements, licensing

of agents and companies, and prescribing policy forms.

In England, the life insurance business spread through various societies in

the 18th century. To regulate the conduct of these "Life Assurance" societies on

sound basis and to eliminate speculation , the Life Assurance Act was enacted in

1774. Further legislation such as the Life Assurance Companies Act of 1870,

provided financial security, when life offices were required to deposit requisite

amount of security and publish account~.