The History of Life Insurance in America: Development of a New Product

Posted February 8th, 2012

“The first attempt at a fire insurance plan in America was in Charleston, South Carolina in 1736 with the formation of the Friendly Society of Charleston (Charles Town).”[1] Disappointingly, in 1740 Charleston suffered a serious fire, and the “losses sustained by the Friendly Society were far too great for its fledgling operation and the organization failed.”  The next attempt of fire insurance in America however is by most accounts successful.

Under Benjamin Franklin’s efforts, the Philadelphia Contributionship issued policies on property and structures, for a “term of seven years upon the payment of a deposit, the interest of which, during the continuance of the policy, belonged to the company.” [2] Once source attributes Franklin’s group was “patterned after the Amicable Contributionship, an organization he may have become familiar with while working in England as a journeyman printer.”

Further, in “1768 the Contributionship adopted as a seal the ‘Hand in Hand,’ a badge or mark that was also placed on every property insured, that all contributors would be encouraged to save it from destruction by fire.”[3] The organization insured, by the end of its first year of operations, $108,360 (in today’s dollars that’s approximately $3,000,000 [using a CPI adjustment]) with premium reserves of $11,291.63 (worth today $310,000).[4] Accordingly, its premium reserve to liabilities ratio was approximately ten and a half percent.  Nevertheless, “[t]here never was a period when a loss of any extent disturbed the finances of the company” said Organization’s Director Binney during the 1852 centennial celebration.[5] The Company in 2009 had outstanding liabilities related to underwriting of approximately 180 million dollars and assets in terms of premium reserves of around 410 million dollars, giving them a ratio today of around two and a quarter to one.[6]

After the creation of the fire insurance companies, life insurance quickly followed suit.  Beyond the objections of assigning an actual dollar value to a human life, life insurance policies began to surface around the mid-eighteenth century.  In 1759 a charter was granted by, The Presbyterian Synods in Philadelphia and New York for “The Corporation for the Relief of Poor and Distressed Presbyterian Ministers, and of the Poor and Distressed Widows and Children of Presbyterian Ministers.”[7] The name would later be changed to the “The Presbyterian Annuity and Life Insurance Company.” It is the first known organization to underwrite life insurance in America.  The idea was to present an “[e]asy and certain means” for “the clergy of the church for making provision for themselves in old age, or for their families”, “by the payment of advances, in consideration of which the company entered into a contract with the individual for the payment of a stipulated amount to his heirs at his death, or to himself in his declining years.”

[1] Mutual Assurance Society of Virginia, “It’s beginning in America.”

[2] Id.

[3] Id.  (A picture of the shield can be accessed through this link:, click “The Fire Mark” link on the right hand of the page, this badge was and is some places commonly known as “Jacob’s Chair”. [Mutual Assurance Society of Virginia]).

[4] History of Philadelphia, 1609-1884, Volume 3 Pg 1884.  By John Thomas Scharf, Thompson Westcott.  L.H. Everts & Co., Philadelphia, 1884.

[5] Id.

[6] The Philadelphia Contributionship “257th Annual Report”

[7] Economic History Association “Life Insurance in the United States through World War I”, Sharon Ann Murphy,

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2 Responses to “The History of Life Insurance in America: Development of a New Product”

  1. Daniel says:

    Thanks for sharing. Look forward to the blog tomorrow. Hope that it contains some discussion on “dead pool” arrangements to foreshadow current efforts to regulate STOLI transactions.

  2. Robert Bloink, Editor says:

    Daniel- If your interested in the latest efforts to reign in STOLI transactions, I can share my an advance copy of, Catalysts for Clarification: Modern Twists on the Insurable Interest Requirement for Life Insurance, 16 CONN. INS. L.J. (2010). The article goes into detail discussing how the NCOIL proposed legislations and carrier changes to their application questions are poised at the leading edges of the pending & forthcoming efforts to curb STOLI abuses. Do you have a specific perspective or insight into specific styles of “dead pool” arrangments? Robert,

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