Tracking the value of life

How a rising star helped set life insurance on the right course

Until the 16th century there wasn’t a recognised method of buying life insurance and looking after your family. Obviously, there was a need. However, it wasn’t as easy as just providing a service to meet the demand. Many early attempts at providing financial aid to families failed.

On a summer day in London,1583, history has it that the first life insurance policy was made in Royal Exchange, with the sum of 400 pounds promised to a certain William Gybbons for the price of 30 pounds if the insured died within a year.

The first company to offer life insurance was Perpetual Assurance Office, which took payments from members with the promise of shares being paid out to families if those members died.

However, without a method for properly assessing risk, these early insurances proved nonviable and, as a result, the companies (and the insurance coverage) failed.

This all changed in 1693, when astronomer and mathematician Edmund Halley (of Halley’s Comet fame) looked to birth and death records as a means of calculating the price of life annuities.

Following this, the British government began to sell life annuities at rates based on the age of the purchaser. Other companies then further developed these methods to create mortality tables, which are still used today – albeit it in a more nuanced form.

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