The History of Life Insurance

Part of the reason we believe in the foundation of life insurance–particularly whole life insurance–-is because it has a strong history that proves its value and usefulness. We talk about this history in passing, yet what is the history of life insurance? 

Today, we want to explore where life insurance came from, and how that can give us context around the product today. 

When Was Life Insurance Invented? 

Interestingly, one of the earliest known conceptual use of life insurance comes from Ancient Greece and Rome. We’re talking somewhere around 600-100 BCE. It began as a way for citizens to pool money and resources to cover burial costs for those who participated. In particular, we know that there were Ancient Roman burial clubs, believed to be conceived of by the military general Gaius Marius. The incentive here was that whoever paid into these “clubs” would benefit from cost coverage in death. 

As burials were important to the Romans, it mattered to people that they be able to do the process justice. These clubs and societies helped to fund that for the benefit of all. 

In the history of life insurance, this is probably the earliest example of private insurance, before that’s what it was called. Though eventually, civilian families began to adopt the practice. It was helpful because they knew that death was inevitable, so by adding some cash to the pool, they could cover their own costs for funerals and other expenses someday. This was a much cheaper option than trying to finance it alone. And interestingly, these burial clubs or societies also had a social component. 

Who Invented Life Insurance? 

While Gaius Marius may have invented what is known as likely the first use of insurance, it wasn’t called insurance at that time. In the history of life insurance, we can actually trace the specific use of that terminology to Edward Lloyd’s of London. In the early days–1688 to be precise–Lloyd’s establishment was just a coffeehouse where merchants, bankers, and sailors would gather to discuss business.

Lloyd’s of London History

As the oldest life insurance company, the history of Lloyd’s of London is a long one. 

As you can imagine, when people gathered to conduct business in Lloyd’s coffeehouse, this included preparations for what would happen after their death. After all, many were sailors and seafaring men, which were dangerous occupations. This, in turn, attracted businessmen who were willing to insure people (and ships) for a premium. These men were the earliest underwriters, who personally funded any insurance claims. Of course, they transacted with people they believed had some longevity.

Over time, these underwriters joined forces to form an association to cast a wider net. And Lloyd’s transformed from a coffeehouse to a formal insurance society by 1774. It was at this time that the British government imposed some oversight into the insurance industry, ensuring client protections. 

History of Life Insurance in America

In America’s history of life insurance, our usage actually dates back to the Colonial era. We’ve been using life insurance since even before the United States was the United States. 

Interestingly, life insurance in America began within church communities. In Pennsylvania around 1717, a group of Presbyterian ministers chose to create a fund for their members to contribute to. This fund was meant to pay for “pious uses,” which generally meant funding and protecting the ventures of church members. 

Over time, this fund expanded to provide what we consider life insurance for widows and children of the church. The death benefit was meant to help widows, particularly widowed women, pay for funeral costs and continue to provide for their children after a spouse’s death. 

The Presbyterian Minister’s Fund continued to grow with conservative management. Even when policy enrollment remained low due to a lack of interest in life insurance, the fund was able to stay afloat and provide for members. In 1990, the PMF became the Convent Life Insurance Company. In 1994, it was taken over by Provident Mutual Life Insurance Company. And finally, in 2002 it was acquired by Nationwide Mutual Insurance Company.

The History of Life Insurance, and Life Insurance Today

While the Presbyterian Minister’s Fund was steadily growing and providing life insurance to their community, it was next adopted by AXA Equitable, who drafted the first group life insurance policy in 1911. By 1930, the life insurance industry was booming. There was an estimated $117 billion worth of policies by that time. 

Due to very little regulation and oversight, the Federal government became involved in 1944. This, however, only lasted a year. In 1945, the McCarren-Ferguson Act overruled this and returned the regulation of life insurance to the states. 

To this day, every single state regulates its own sale and purchase of life insurance. This is why, in order to buy life insurance, you must work with an agent who is licensed in your state. Fun fact, Prosperity Thinkers is licensed to sell life insurance in all 50 states, and we do it virtually! We love being able to provide service all over the country. 

What this history of life insurance proves is that there’s precedent for wanting to protect one’s own life. It creates a net of certainty that allows you to live life to the fullest, knowing that your family and loved ones are protected financially from disaster. Life insurance is not a new concept–it’s one that has been tested and tested, and it’s greatly improved over time to be the product you know and love today. Particularly whole life insurance and term insurance (as a supplement), which have been around the longest and have the best track record. 

To find out what life insurance policy is right for you, book with the Prosperity Thinkers team today, or email your questions to we*****@pr****************.com.

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