If you enjoy watching an entertaining, old-fashioned western on TV, then you would probably accept the notion of a gunslinger jumping out of a window and falling two stories onto a moving horse and taking out eight bad guys with a six-shooter… and find it all perfectly believable.
But odds are, if a Hollywood scriptwriter ever added a scene in which someone like Clint Eastwood or John Wayne discussed his life insurance policy with an agent, you’d stare at the screen in disbelief.
As a scene, it wouldn’t ring true. But life insurance has been around since the days of the Old West… and even before that.
The Origin of Life Insurance
A life insurance premium may not be the most fun expense you have but our ancestors sure believed in it. They desperately needed it, too. Have you ever wondered just how life insurance became such a large part of those life decisions we make as a grown up?
Originated in Greek and Roman Days
The ancient Greeks had what were called “benevolent societies,” in which members would pay money, and when they died, the other members would take care of the living family members — and pay funeral expenses.
In Roman times, a burial club was formed, possibly by Gaius Marius (157 BC – January 13, 86 BC), a Roman general and statesman. He is said to have convinced his fellow soldiers to pool together their money, and if a member of the group died, out of the collected money, the others would pay for the funeral expenses. Considering a typical way to go in battle was to be speared by your enemy, this wasn’t a bad idea.
But this wasn’t the origin of insurance itself. Business insurance had existed in some form for years.
As far back as 1,000 B.C., the Babylonians were using a system in which merchants who borrowed money to pay for a shipment could pay an extra amount. For that extra amount, if the ship were stolen or sank in a storm, the Babylonian businessman could then cancel his loan. The families of the Babylonian’s captain and crew, however — they were on their own.
Life Insurance Timeline
If kids studied life insurance history in school, this date would come up next.
In 1662, John Graunt, a haberdasher, somehow became interested in mortality and found himself pouring through London’s public records. After extensive research, he estimated that 64 out of 100 babies born between 1603 and 1661 reached the age of six, but only 1 in 100 lived to be 76. He published his findings and titled it, Observations.
Interestingly, his family would have benefited had Graunt had life insurance. On April 18, 1674, he died of jaundice and in poverty, apparently stemming from losses he incurred during the Great London Fire of 1666. Fortunately, his widow wasn’t left completely high and dry. According to the book, “Public Health: The Development of a Discipline,” she was given a pension, from Graunt’s membership in a trade association.
Graunt was long gone, but Observations, in a sense, lived on.
Edmund Halley, the British mathematician and the man who would later have a comet named after him, used the data in Observations to help create the first life table. He was then able to determine a better method of valuing life annuities — which the British government was selling, but at far too low of prices.
Halley’s work would be influential in the insurance industry for years to come.
The first insurance company in the United States arrived on the scene in Charleston, South Carolina in 1735 (although life insurance wasn’t sold at the firm for another 25 years).
In 1759, Franklin, who had already started a mutual insurance company to fight against fire losses, began the first life insurance company, the Presbyterian Ministers’ Fund.
Franklin was a little incredulous that people had to be convinced to pay for life insurance. It was evidently around this time that he said an often quoted line — at least often-quoted in the insurance industry:
A policy of life insurance is the oldest and safest mode of making certain provision for one’s family. It is a strange anomaly that men should be careful to insure their houses, their ships, their merchandise, and yet neglect to insure their lives, surely the most important of all to their families, and more subject to loss.
Franklin was a convincing fellow, but well into the 1800s, life insurance still wasn’t exactly mainstream. For instance, when the New England Mutual Life Insurance Company opened its doors in 1835, they didn’t actually get around to selling life insurance for another eight years.
An insurance trade industry book in the 1870s described the problems the New England company faced this way:
The hard times of 1836* came on, and the prospect for several years offered little encouragement for attempting an enterprise so new and uncertain as life insurance.
(*1836 may have not been a great year, but the author of the insurance trade industry book was probably really thinking of the Panic of 1837, an economic crisis that lasted into the 1840’s.)
Echoing what our friend Gaius Marius learned in the Roman days, the Civil War also made a pretty convincing argument that there might be something to life insurance. In 1863, the National Union Life and Limb Insurance, based out of New York, began organizing and insuring Civil War sailors and soldiers. Even so, by the end of 1864, the company only had 17 life and 56 accident policies.
But consumers started coming around, and the company persevered. Five years later, they dropped the accident policies and changed their name to the Metropolitan Life Insurance Company, now also known as MetLife.
Another famed company, Prudential, got its start about a decade later. In 1873 Newark, New Jersey, the Widows and Orphans Friendly Society opened its doors to sell a limited but important form of life insurance: burial insurance.
In any case, two years later, the Widows and Orphans Friendly Society apparently decided to work on branding and called themselves the Prudential Friendly Society.
It is believed to be the first company to sell to the working class, offering funeral and burial expenses, with some weekly premiums as low as three cents, according to Prudential’s website.
In 1885, for those wondering, Prudential Friendly Society renamed themselves as the Prudential Insurance Company of America.
But it’s easy to see why, by the end of the 1800s, the insurance industry had matured. This was, after all, an era in which you were living with a raft of diseases, like smallpox, swine plague, and pulmonary tuberculosis. Moms died routinely in childbirth. You might drink infected well water or be unfortunate enough to be on horseback during a blizzard (no heater in the car).
Honestly, it’s a wonder any of our ancestors lived long enough to have descendants.
The Great Depression
You might think that this would have been a time when everyone, in a desperate bid to save money, canceled their policies, but — perhaps for the reason that there was so much despair — life insurance as a product was stronger than ever.
During the 1930s, there were more than 120 million life insurance policies in force, just about the number of people living in America at the time, including children, according to Sharon Ann Murphy’s book, Investing in Life: Insurance in Antebellum America.
Another important year in the historical annals of life insurance. The World Wide Web officially came into existence (not to be confused with the advent of the internet, which has been around since the 1960s… yeah, we don’t get it either), although surfing on the net wouldn’t really become a worldwide phenomenon until the mid-1990s.
Internet usage changed life insurance forever, along with just about every industry out there, because suddenly it became easier to shop for life insurance and learn more about it. You have to think some pioneer way back when, worried about his or her town’s latest diphtheria outbreak, might have appreciated a quick way to do some online research and find an agent selling life insurance.
Improving Women’s Rights
Life insurance didn’t help women get the right to the vote or improve their career prospects, but during the 1800s and early 1900s, when women weren’t exactly respected by their male peers, the industry encouraged their male customers to be better providers for their families.
In the 1915 textbook Life Insurance, author Solomon Stephen Huebner forcefully argued to his insurance agent readers:
…a woman’s rights, as well as her duty in the matter of life insurance should also be emphasized. She should be taught that it is not only her husband’s duty to adequately protect the family, if that is at all possible, but that it is also her duty, if necessary, to use her persuasive powers to get him to act, and if that does not avail, to insist on action as her right.
Not only has she a right to personal protection, but her rights as regards life insurance are further increased by her interest in the children which are as much hers as they are her husband’s.
Life Insurance and Serial Killers
Nobody in the insurance industry is proud of this, but America’s earliest serial killers are infamous for taking out life insurance policies on their victims.
H.H. Holmes, famed for killing victims at the 1893 Chicago World’s Fair, made it a practice to take out policies on his victims.
America’s first female serial killer, Belle Gunness, did this as well. The Indiana resident had a couple of husbands whose lives were cut short and were never seen again… after Gunness took out a policy on them. She also dated several beaus before robbing them and ending their lives.
The life insurance also later became a nifty plot in murder movies, particularly in the 1944 classic Double Indemnity, in which an insurance salesman falls for a housewife, who convinces the sap to murder her husband because his life insurance has a double indemnity clause (in certain cases, the beneficiary is paid double).
Interesting Historical Fact
The National Archives and Records Administration has a letter in their files from John F. Kennedy, war hero and future president, dated 1947.
In the letter, he refers to a $10,000 life insurance policy, which he presumably took out during his navy days in World War II.