When Did Life Insurance Start? A Look at Its Origins

Life insurance, at its core, provides financial protection against the uncertainty of death, offering a monetary safety net to beneficiaries upon the policyholder’s passing. This financial tool helps families manage the economic consequences that can arise from the loss of a primary income earner or to cover final expenses. The evolution of this concept, from ancient communal support systems to the structured financial products of today, reveals a long history of human societies seeking to mitigate the financial impact of mortality.

Early Concepts of Community Support

Before formal life insurance existed, societies developed various forms of mutual aid to support individuals and families facing hardship, particularly after a death. Ancient Roman burial clubs collected contributions from members to cover funeral costs and provide some financial assistance to surviving family members. These early groups, often referred to as “friendly societies” or “benefit societies,” pooled resources to create a collective safety net.

Medieval guilds also functioned in a similar way, offering support to their members in times of sickness or death. In the United States, mutual aid societies became prominent among immigrant communities, providing essential services like medical care and funeral expenses. These arrangements, while foundational, operated on principles of collective responsibility rather than the calculated risk assessment seen in modern insurance.

The Genesis of Formal Policies

The shift towards mathematically-based, contractual life insurance began to take shape in 17th and 18th century Europe. Astronomer Edmund Halley, who in 1693 developed one of the earliest mortality tables, provided a statistical basis for understanding death rates. This advancement allowed for a more scientific approach to assessing risk and calculating premiums.

The Amicable Society for a Perpetual Assurance Office, founded in London in 1706, is recognized as the world’s first life insurance company. Its members paid annual fixed payments, and a portion was distributed among the wives and children of deceased members. Later, in 1762, the Society for Equitable Assurances on Lives and Survivorship was established in England, pioneering age-based premiums derived from mortality rates. This marked the birth of modern life insurance, laying the groundwork for scientific insurance practices.

Growth and Diversification

Life insurance expanded significantly in the 19th century. In the United States, the concept of life insurance emerged in the 1700s, with the Presbyterian Ministers’ Fund founded in 1759 to provide financial relief to widows and children of ministers.

As the 19th century progressed, demand for financial security increased with urbanization and industrialization, leading to the formation of more life insurance companies. The industry experienced a growth spurt, particularly after 1840, when a New York law made it legal for women to take out life insurance policies on their husbands, also offering protection from creditors. This period saw the emergence of different policy types, such as term life insurance and whole life insurance.

Shaping the Industry

From the late 19th century into the 20th century, the life insurance industry matured through advancements in actuarial science and the establishment of industry standards. Actuaries, professionals specializing in the financial impact of risk and uncertainty, became central to the industry. The development of mortality tables continued to be a key tool for this work.

Early regulatory frameworks began to emerge, providing oversight and to standardize practices. These regulations aimed to ensure that companies maintained sufficient reserves and operated transparently, protecting policyholders. The professionalization of actuaries and the development of these standards created a more stable and reliable environment for the life insurance business to thrive.