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BusinessMirror An abridged history of life insurance

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An abridged history of life insurance 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 Dodsons death in 1757, his legacy was fortified with the governments 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 worlds 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.



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 Englands 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 Wrights Tables, which estimated the premiums and reserves needed for the sound valuation of a life-insurance policy. Wright was also credited for the formulation of life insurances 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 Lloyds 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 companys leading foreign branch, placing third overall in the whole organization.

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



(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 Commissions deputy commissioner for legal services. Send comments to [email protected].

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