A brief history of life insurance

Did you know that life insurance has been around since the days of ancient Rome? Or that Lloyd’s of London got its start as a coffee spot for sailors?

In honor of Life Insurance Awareness Month, we’ve compiled a few pivotal moments in life insurance history to give you a better idea of the product’s storied past.

Use the knowledge to wow your clients with your life insurance expertise. To give yourself a better understanding of where life insurance is headed. Or maybe just to sweep any insurance-related category on “Jeopardy.” The possibilites are endless, really.

Happy LIAM!

100 B.C.

The origins of the concept of life insurance, as we know it, can be traced to ancient Rome. Caius Marius, a Roman military leader, created a burial club among his troops, so in the event of the unexpected death of a club member, other members would pay for the funeral expenses.

Many similar clubs originated in this era. Romans believed anyone who was improperly buried would become an unhappy ghost, so the clubs were embraced by the government and military because of the deep conviction that it was absolutely essential for each person, regardless of social standing, to be buried in the correct manner. The clubs later evolved to also provide a stipend to the survivors of the deceased.

The concept disappeared for a long period of time, however, after the Roman Empire fell around 450 A.D.

(AP Photo/Riccardo De Luca)

1688

Edward Lloyd’s Coffee House, a small shop on London’ Tower Street and a popular gathering place for ship captains, ship owners and merchants, becomes the go-to place for shipping news and, eventually, marine insurance. It was there that the modern concept of an insurance company came into being.

In 1769, a group of professional underwriters broke off to establish New Lloyd’s Coffee House, which would eventually grow up into Lloyd’s of London.

1759

The Presbyterian Synod of Philadelphia sponsored the first life insurance corporation in America for the benefit of Presbyterian ministers and their dependents. Episcopalian ministers organized a similar fund a decade later.

(The first insurance company in the American colonies was formed before this, in Charleston, S.C., in 1735, but it offered only fire insurance at first. It didn’t add life insurance until 1760.)

(AP Photo/Lefteris Pitarakis)

1837

The panic of 1837 and the resulting financial crisis spurred a shift toward mutualization for life insurance companies. Between 1838 and 1849, only one life insurance company raised capital on a stock basis. During the same period, 17 mutuals, requiring little initial capital, were chartered.

The spread of mutuals as well as other developments — like legal changes allowing women to purchase life insurance and a cultural shift away from preachers who demonized life insurance as “gambling” — created a boom period for life insurance companies. Many of today’s largest life insurers were formed in this period, including New York Life, MassMutual, John Hancock and MetLife.

1875

During the depression years of 1871 to 1874, 46 life insurance companies ceased operations, with 32 failing outright. The result: $35 million in losses for policyholders.

In 1875, the Widows and Orphans Friendly Society was founded in Newark, N.J. with a single product: burial insurance. It was the first company in the United States to make life insurance available to the working class. That company eventually became Prudential.

(AP Photo/Rajanish Kakade)