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This is your life policy

Life insurance, so much part of our everyday lives, has a longer history than most would imagine and as the welfare state withers, life companies could again assume the prominence they had in Victorian Britain.

Even the Romans did it. But life insurance in the Roman Empire was primarily a short-term contract – more comparable to what we understand as travel insurance – and primarily the preserve of merchants looking for cover for a dangerous journey.

However, Roman insurance was not limited to such simple contracts. The Romans are known to have had a table of annuity values founded on mortality data known as Ulpian&#39s Table, which was in use in parts of Italy until two centuries ago.

Some historians go so far as to argue that the Romans even had a kind of mutual life insurance. This, they say, was a derivation of ancient burial societies, in which people who were member of sects dedicated to a particular god would pay subscriptions which would in turn take care of their death expenses if they had no families. This simple concept developed and began to include survival benefits for the family of the deceased.

One of the earliest life insurance contracts written in this country dates from 1583. However, the merchants who had insured an alderman were unwilling to pay out after he died within the allotted period. So the first indigenous life insurance contract that we know about had to be settled by the courts. The merchants were forced to pay out on the policy.

Another policy dates from 1588, when William Gibbons bought life insurance for one year from the Chamber of Assurances for the princely sum of £328.6s.8d.

Life insurance schemes were run on the basis of limited membership and mainly by the Amicable Society for a Perpetual Assurance (chartered in 1706), the Royal Exch-ange and London Assurance.

Total membership was extremely select, with only a few thousand people subscribing. Criteria were crude, though small pox victims and childbearing women had to pay extra premium. Policies tended to be short term and restricted to the upper echelons of society.

One curious side effect of the emergence of the life insurance industry was that people began to use life insurance as a means of speculation, in effect gambling with other people&#39s lives.

The problem was serious enough to warrant legislation – the 1774 Gambling Act was designed to halt the practice and introduced the requirement for declaration of interest in the insured life.

In 1762, the Society for Equitable Assurances for Lives and Survivorships was formed following a concept developed by James Dobson.

Dobson, a Fellow of the Royal Society, has come under the influence of a new wave of mathematics emanating from figures such as Abraham de Moivre and Edmund Halley.

This had given him the idea of founding a society on new Enlightenment principles and putting life insurance on a scientific basis, believing that premiums could be much lower and fairer as a result. Even though Dobson died before he could see the fruits of his labours, the application of mortality tables and mathematics of probability to the calculation of premiums revolutionised life assurance.

The template of the Equitable was copied by many others, which have gone on to become household names such as Norwich Union Life Insurance Society (1808) and Scottish Widows&#39 Fund and Life Assurance Society (1815).

These were followed by others, set up for particular sections of society, such as those founded by Protestants (the “provident” societies).

Often, the subscription criteria were strongly influenced by the beliefs of a particular section in society. For instance, Scottish Mutual initially req-uired total abstinence from its policyholders. Others restricted themselves to particular professions, most notably Clerical, Medical and General.

The Scottish companies were for the most part mutuals, which helped them escape the scandals that bedevilled the sector in the first half of the nineteenth century. It was on the basis of good reputation they acquired at this time that Scotland secured its strong presence in the industry.

The life insurance industry also contributed commission hungry salesmen and gaudy blanket advertising at train stations to the tapestry of Victorian society.

Vast armies of salespeople and agents were employed, totalling perhaps as many as 80,000 at the beginning of the Twentieth Century.

Another development was the introduction of group life schemes – an innovation of Provident Mutual, which set up a scheme for the Post Office in 1859.

The Prudential pioneered the selling of life insurance scheme to the working class. Hitherto, it had been the preserve of the upper and middle classes. The Prudential&#39s strategy of selling “penny policies” was enormously successful, and it is on the basis of marketing life insurance to the working classes that the company not only wormed its way into the national psyche (“the man from the Pru”) but also became the dominant player.

In 1871, the Pru introduced to major innovations – arithmoneters (a primitive type of calculator) and the employment of female clerks, as long as they were “daughters of professional, financially secure and socially respectable men” and worked in separate offices.

Like so much else in Victorian Britain, the life industry was a successful exporter, particularly to the colonies. In addition, a local market became established for the sale of interests in life policies and policies were also frequently used as securities for loans.

The life industry continued to grow strongly and even the economic turmoil of the 1920s and 1930s and the creation of the welfare state after the Second World War did little to impede its relentless rise.

Indeed, becoming a life insurance salesman was a popular option for servicemen returning from war, who were quickly sent out with a rate book to work on purely on commission.

With the housing boom and introduction of personal pensions in the Thatcher years, the companies were given a new lease of life, only for that to be tarnished by the repercussions of a succession of scandals relating to private pension misselling, the shaming of Equitable Life and concerns over endowment mortgages shortfalls.

Now the same companies have been again invited into partnership with the state as part of the New Labour government&#39s flagship stakeholder pensions policy.

But received wisdom is that the Government&#39s low-margin pension is going to claim some high-profile scalps as life companies are forced to consolidate. How many of the old life offices and their histories will survive into the future is not yet clear.

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