Life Insurance Industry History
Filed Under Afforable Life Insurance, Life Insurance Companies, Life Insurance Industry History, Life Insurance Plans, Life Insurance Providers |
The American Life Insurance Industry can be traced back to the late colonial period. In Philadelphia and New York the Presbyterian Synods started the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759. This was the first-ever life insurance company.
By 1769 the Episcopalian ministers had organized a similar fund. From 1787-1836 26 companies began offering life insurance to the general public, but they didn’t tend to stay open more than a couple of years and sold very few policies. Few companies managed to survive and experience success in this line of business. It wasn’t because they were offering Cheap Life Insurance; it was just a difficult business back in the early years of the US.
They were the Pennsylvania Company for Insurances on Lives and Granting Annuities, The Massachusetts Hospital Life Insurance Company, the Baltimore Life Insurance Company, the New York Life Insurance and Trust company and the Girard Life Insurance, Annuity, and Trust Company of Pennsylvania.
Even though the Life Insurance companies had a very slow and rocky start they began to make a significant difference beginning in the 1839’s. Life insurance policies began growing steadily from about $600,000 in 1830 to just under $5 million a decade later, with New York life accounting for more than half of the $5 million amount.
Over the next five years insurance almost tripled to $14.5 million and then by 1850 reached just under $100 million with the insurance spread amongst 48 major companies. Life Insurance Companies’ sudden success caused two major developments - changes in legislation impacting life insurance and a shift in the corporate structure of companies towards mutuallization.
Life Insurance companies had a target market- women and children, who would serve as the main beneficiaries of these policies even though the majority of women were prohibited by law from accepting the protection offered in the event of the death of their husband.
Married women couldn’t enter into contracts on their own and therefore couldn’t take out there on policies and “affection”- or a husband and wife relationship was not enough to grant on monetary interest in one’s life upon death or accident. In this era, it was difficult to find Afforable Life Insurance.
The only way around this was for the husband to take out the policy on his own life and assign his wife or children as beneficiaries- this too was flawed as the policy was considered part of the husband’s estate and was then allowed to be claimed by anyone the husband owed money to prior to death.
The 1840’s also brought with it the boom in the mutual life industry. This was not a new concept, and allowed annual profits to be redistributed to the policy holders rather than the stock holders. Mutuals were easier to obtain requiring very little initial capital and relying instead on high paid premiums and from high volume sales to pay any death claims.
After the civil war many legislative laws governing life insurance and mutual funds changed- and the purchase of life insurance policies began to climb totaling around $600 million. By the twentieth century, individuals had purchased around $117 billion of life insurance policies, and they were still growing strong.
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