Life Insurance

LIFE INSURANCE, a contract insuring the payment of money on the happening of any contingency, or one of a variety of contingencies, dependent on human life; as this definition would, however, include contracts for annuities or pure endow ments, it should be limited by the condition that one of the con tingencies should be death (except death by accident only). The sum insured is agreed upon at the outset and may be added to from time to time, out of profits or otherwise; life insurance therefore differs in character from other forms of insurance, the essence of which is indemnity to the insured for actual loss incurred.

The word assurance is more commonly used than insurance in connection with life contracts, the latter word being applied in general to contracts of indemnity; it is not, however, incorrect to use either word in any context.

Primitive Form of Life Insurance.

The principle that groups of persons should agree to make common cause against dangers which threaten all, but are individual in operation, is an old one. Action of this nature was moreover, in its origin, dictated by the interest of the group rather than by the interests of its members. As communications became more widely organized, the character of the group granting the benefit naturally tended to become that of a class or trade union, but until what are histori cally known as modern times, insuring associations were asso ciations of persons, not of capital, and insurance of members would only have been one of their reasons for existence. Modern life insurance, mainly by companies, is concerned only with the risk to be insured against, and even institutions which were, in their origin, distinguished by some bond of class or calling among their members, are usually open to do business with all comers, and retain but a shadow of their earlier exclusiveness.

The beginnings of true life insurance, that is to say, the pay ment of certain benefits on death, against certain periodical sub scriptions, are to be found in the Roman Collegia. The gilds of mediaeval times would, in many cases, make provision for the decent burial of a member, but the extent of such assistance would depend on the actual needs of the dead man's dependants and was not, therefore, life insurance in the full sense.

Marine insurance is generally believed to have an earlier origin than life insurance and it is therefore natural that the first definite contracts of life insurance, made with underwriters as a matter of business, should have been on the lives of mariners. The earliest

contract of this type, recorded to have been made in England, was effected in 1583.

The First Companies.

An important step was the foundation in England of the first insurance companies. The Amicable Society for a Perpetual Assurance was founded in 1705, but provided merely for the of certain sums between the representa tives of those members who died each year. The Royal Exchange Assurance Corporation and the London Assurance Corporation, both incorporated by royal charter in 172o, were, however, true life insurance institutions, and, with the Amicable, held the field for 4o years. During this period they effected only a moderate amoant of life insurance business; also the contracts were still of the simplest nature, being as a rule for a term of one year.

The period of scientific insurance began with the foundation of the Equitable society in 1762. Until that date there had been no endeavour to graduate premium rates according to the age of the person insured, despite the obvious fact that such differentia tion was called for. The material for calculating rates was, however, in existence, although it was imperfect : Dr. Edmund Halley's tables, based on the deaths in the city of Breslau in the years 1687-91, and the death rates derived from the London bills of mortality of the period, were the foundation of the society's first table of premiums. It is moreover notable that in addition to differentiating rates, the society introduced the principle of making a policy renewable from year to year throughout life. The success of the new venture was soon apparent : in 1776 it made its first actuarial valuation of assets and liabilities and returned part of the premiums paid to the insured by way of bonus; this was the beginning of the with-profit system, which might have been much longer in making its appearance, had it not been for the fact that the rates charged by the Equitable were decidedly on the safe side, although in most cases substantially less than the is to a per Liao for a year's insurance which had been the general rule until 1762.