When was life insurance invented?

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Life insurance is a time-tested way to financially provide for your family after you pass away. Believe it or not, the concept of life insurance is actually much older than the United States! Life insurance has been around for centuries, from the very first instances of burial insurance invented in ancient Rome to the beginnings of modern life insurance in the 1600s in London.

Life insurance was invented by the ancient Romans when Roman soldiers created “burial clubs” as a way to pay for the religious rites and burial expenses of their fellow soldiers who died in battle. Read more below on how life insurance started and its journey to the modern form of life insurance we’re familiar with today.

Life Insurance in Ancient Times

Even our ancestors worried about leaving family with the cost of a funeral. Life insurance in ancient times can be traced to the burial clubs of ancient Rome and ancient Egypt.1 These clubs were an early form of final expense insurance and were initially introduced as a way for soldiers to take care of fellow men lost in battle. Soldiers paid regular dues to the club and those funds were used for funeral costs and other religious rites and activities when a soldier died. 

This idea of burial clubs eventually spread outside the Roman military to the general public. Members of clubs could be of the same trade, religion, social group or family. 

Funerals at the time sometimes included not just the cost of burial but also a procession of performers—musicians, mimes, professional mourners, and actors dressed as ancestors of the deceased. The more wealthy the dead, the more elaborate the procession. The burial clubs allowed even those who were less wealthy to have impressive funeral processions without leaving their family in a large amount of debt.

The Beginning of Modern Life Insurance

There were many different types of burial clubs (also called burial funds) throughout history, with those ideas and structures influencing modern life insurance. 

The first true life insurance policy can be traced to a term life policy from 1583.2 A man was insured for a number of months and his beneficiary would receive a payout if he died during that time period. 

Insurance as a general concept became popular in London in the 1600s. With the rise of coffee as the drink of choice, coffee shops were popping up all over the city. They were a favorite spot for merchants and businessmen to discuss various types of business, and Lloyd’s Coffee Shop along the River Thames became a hub for ship owners, captains and rich society members.3 

These affluent members of society recognized a business opportunity: they could underwrite and fund insurance policies for ship owners in the event those ships didn’t return from trips at sea. Now Lloyd’s of London, Llyod’s Coffee Shop, became the place where modern insurance really took hold. 

The idea of premium payment amounts being set by age was introduced in the early 1700s and is considered to be the invention of life insurance.4 William Talbot and Sir Thomas Allen created the Amicable Society for a Perpetual Assurance Office, which paid an equal amount to the wives and children of deceased members at the end of the year. In the 1750s the formula to calculate the mortality rate for a region was developed, which allowed premium cost to be equitably distributed based on the risk the insurance company was taking on with the member. That formula evolved into the life insurance of today.

Life insurance began in Colonial America before the United States was formed. The Presbyterian (1759) and Episcopalian (1769) churches developed funds as a way to pay widows and children of deceased clergy members.5 From there life insurance companies began forming rapidly in the newly formed United States.

Facts About the History of Life Insurance

  • Ancient Egyptians, like the Romans, had large ceremonies and processions during funerals. There is evidence from a soldier’s household 4,500 years ago showing he was paying a stipend to the Guild of Stone-Masons for burial services after he passed away.6
  • Prior to 1840, women had to worry about the legality of owning a life insurance policy without their husband’s consent.5 
  • The night before the Great Depression there was an equivalent to one life insurance policy for each man, woman and child in the country.
  • The Supreme Court decided in 1869 that insurance was not interstate commerce and should be ruled by the states, then reversed that decision in 1944, giving power to the federal government. 
  • In 1945 Franklin D. Roosevelt signed a law that put the oversight of insurance back with each state government.7 That remains true today, where the state makes laws and regulations related to life insurance. 

The 20th Century Evolution of Life Insurance

In 1911 AXA Equitable created the first group life insurance policy, covering 125 employees at the Pantasote Leather Company.5 Unlike most life insurance policies, this type of coverage did not require a medical examination or an individual application. By 1919, 29 companies offered group policies.

The life insurance industry was booming in the early 20th century but was highly unregulated despite a tremendous amount of money in the industry. Policy purchases increased after the Civil War and again after WWI, so before the Great Depression, there was $117 billion invested in life insurance policies.5 

This lack of regulation led to widespread fraud, including high premiums and no payouts. As people began to lose faith in the industry, the government introduced the McCarren-Ferguson Act to give states more oversight and bring more regulation to the field of life insurance. The act was signed into law in 1945 by Franklin D. Roosevelt.7

The Future of the Life Insurance Industry

What does the future of life insurance look like? Technology is changing the industry, making it faster and more convenient.

The internet not only makes life insurance research easier, but in some cases, it makes the application results instant. You can apply for instant life insurance coverage to get a term policy without the hassle of a medical exam. The life insurance technology our licensed insurance agents use at SelectQuote can search multiple companies at once to find the insurer that matches your price point and needs.

Let SelectQuote Help Find the Right Life Insurance for You

At SelectQuote, we have 35 years of experience helping our customers navigate the life insurance process. After launching our life insurance services in 1985, we’ve expanded to offer auto insurance, home insurance and Medicare coverage. More than 2 million families trust SelectQuote to save them both time and money for their insurance needs.  

Our process is simple: after you fill out a brief form, your SelectQuote agent uses that information alongside our proprietary technology to quickly search policies specific to your situation and needs. We partner with highly-rated insurance carriers to offer you quotes from companies you can trust. Your agent will walk you through which life insurance quotes may work best for you and answer any questions you may have. We’re there for you every step of the way, helping you decide on a policy that fits best with your needs and budget. 

At SelectQuote, we shop and you save!

1 https://classicalwisdom.com/culture/traditions/death-funeral-rites-and-burial-in-ancient-rome/

2 https://www.actuaries.org.uk/system/files/documents/pdf/0114-0133.pdf

3 https://www.lloyds.com/about-lloyds/history/coffee-and-commerce

4 http://www.aviva.com/about-us/heritage/companies/amicable-society/

5 https://eh.net/encyclopedia/life-insurance-in-the-united-states-through-world-war-i/

6 https://www.funeralguide.co.uk/blog/funding-funerals-through-history7https://content.naic.org/cipr-topics/mccarran-ferguson-act

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