A hurried history of life insurance!
Did you know that the UK has the fourth largest insurance and savings industry in the world? With 5.5m life insurance policies in the UK*, life cover makes up a significant part of this - but where did it all begin? In years gone by, it could be a very different story for widows and orphans if the breadwinner in their family died, so here’s our brief look at the history of life insurance!
The Romans operated an early type of life insurance, paying into a burial club to cover the costs of their funeral. It’s thought, however, that the oldest life insurance policy was written in London in 1583. It insured the life of a Mr William Gybbons, a salter of meat and fish, and the beneficiary was a man called Richard Martin. Intriguingly, Mr Gybbons died near the end of the policy year but the underwriters refused to pay on the grounds that the contract was for a lunar year and not a calendar year! However, the court ruled in favour Mr Martin and a payout was made.
The archives of our partner Aviva reveal some fascinating snippets into life insurance in the past. Aviva’s history goes back more than 300 years, to The Amicable Society. In 1706, a London merchant called Nathaniel Carpenter took out the first policy for the annual sun of six pounds and 14 shillings - the equivalent of more than £1,000 today! - with the beneficiary being his wife, Sarah.
The Amicable Society allowed only a maximum of 2,000 members, each paying the annual £6 4s and with all contributions being stored in an iron chest. This was replaced in 1768 with a specially-built strong room, used until 1776 when the society opened its first bank account. The bank was Gosling, Clive & Gosling Bankers, later part of Barclays.
Things didn’t always go smoothly at The Amicable Society, however. The manager absconded with some funds in 1730 and, before this, a couple of clerks and a treasurer embezzled some money. And the society's accounts for 1795-96 were prepared by an accountant who was at that time a resident of the notorious Fleet Prison!
A mathematician called James Dodson had tried to take out a policy with The Amicable but had been refused on the grounds he was over 45. He tried to establish a new company with the aim of calculating premiums based on risk and, although he was unsuccessful, his ideas led in 1762 to the creation of Equitable Life, the world’s first mutual insurer and today the UK’s oldest. The Equitable pioneered age-based premiums based on mortality rates and by 1799 had 5,000 policies in force. By 1810 it held 10,000 policies - with notable members including poet Samuel Taylor Coleridge and novelist Sir Walter Scott.
In 1774 the Life Assurance Act was passed by Parliament to end a legal gambling loophole. Until the Act, a person could take out life insurance against anyone, regardless of whether they knew them or not. Following the Act, the beneficiary of a policy had to show a ‘legitimate interest’ in the person whose life was insured - a law which still applies today.
In Scotland, a group of men gathered in 1812 in Edinburgh’s Royal Exchange Coffee Rooms to set up a fund for ‘widows, sisters and other females’, and Scottish Widows was born. Sir Walter Scott’s name again crops up, as in 1824 he was issued with a policy of assurance by the company for £3,000. In 1912, two passengers who lost their lives on the Titanic were Scottish Widows policyholders, and the Titanic Fund continued in place until 1959.
Today there are more than 350 authorised life insurance companies in the UK, with five million whole of life insurance policies and 500,000 term life insurance policies in place.* Almost 325,000 people work in the insurance industry and 98% of protection claims were paid out in 2016. Life cover can be bought with critical illness cover, whilst joint life insurance is available for couples. You can find the right policy for your lifestyle with our online life insurance comparison tool or, if you already have cover in place, maybe it’s time to review your protection insurance to ensure it still suits your circumstances.