The Secret History of Life Insurance

With so many people getting life insurance policies over the Internet these days, it’s easy to think of life insurance coverage as a product of the digital age. But did you know that the history of life insurance policies can be traced all the way back to ancient Rome?

The concept of life insurance was first introduced by the Roman military leader Caius Marius, who created a “burial club” for his troops around 100 B.C. If a member of the club were to die unexpectedly, other members would pay for his funeral expenses. Because the Romans believed that anyone who was wasn’t given a proper burial would haunt the living, Marius’s club spawned several copycats – many of which were backed by the military and the government. Eventually, these burial clubs began providing a stipend to the survivors of the deceased. After the fall of the Roman Empire, however, these burial clubs seem to have disappeared for over a thousand years.

Fast forward to 1688, when a popular London hangout for ship captains, owners and merchants called Edward Lloyd’s Coffee House began selling marine insurance. It was there that the modern concept of an insurance company was born. In 1769, a group of underwriters left Edward Lloyd’s Coffee House to form New Lloyd’s Coffee House – which would eventually become Lloyd’s of London.

1735 saw the formation of the first insurance company in the US, which offered fire insurance exclusively until 1760 – when it began selling life insurance, too. Around the same time, the country’s first life insurance corporation was established in Philadelphia for the benefit of Presbyterian ministers and their dependents.

Mutualization became the norm for life insurance companies following the Panic of 1837 and the ensuing financial crisis. Between 1838 and 1849, 17 mutual life insurance companies were chartered – including many of today’s largest life insurance companies. However, the depression of 1871-1874 put 46 life insurance companies out of business, and cost policyholders a combined $35 million in losses.

The industry didn’t bounce back until after World War I, when life insurance policy sales rose dramatically. When the Great Depression hit, there were more than 120 million active life insurance policies in the United States. Life insurance sales experienced an even more dramatic lift during the economic boom that followed World War II. At the time of the Bicentennial, roughly 72 percent of the adult population of the US – and more than 90 percent of all married couples – had some kind of life insurance coverage.

Those numbers have gone down considerably since the mid-1970s. According to LIMRA’s 2010 Trends in Life Insurance Ownership study, only 44 percent of US households have individual life insurance policies. And according to the 2011 Life Jacket study by Genworth, 40 percent of Americans who have life insurance don’t think they have enough. If it’s been five years or more since you purchased your coverage, it may be time to check in with SelectQuote and make sure your life insurance policy is keeping up with you. For a free assessment of your current life insurance coverage, click here or call 1-855-872-1266.

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