Chronicles and characters of the stock exchange

by of the Bank of England John Francis

It is believed that England is the only state in which the insurance of lives has never been prohibited. The Dutch, a commercial people, refused to legalize it until a recent period; and in France it was long deemed unlawful, “because it is an offence against public decency to set a price upon the life of a freeman, which is above all valuation.” Another great objection was the fear that individuals might destroy themselves to enrich their families; and though this exaggerated view of the case is provided for in modern policies, yet the following anecdote will prove that the fear was not altogether groundless. So early as the middle of the eighteenth century, the clause which excluded the representatives of suicides from a participation in the amount insured excited attention; and an office was established, which, for a corresponding increase of premium, paid the amount to the relatives of the self-murderer. One man, deeply in debt, wishing to pay his creditors, and not knowing how, went to the office, insured his life, and invited the insurers to dine with him at a tavern, where several other persons were present. After dinner he rose, and addressing the former, said, “Gentlemen, it is fitting you should know the company you have met. These are my tradesmen, whom I could not pay without your assistance. I am greatly obliged to you; and now——” Without another word he bowed, pulled out a pistol, and shot himself.

The number of insurances was, at first, necessarily very limited; the mode in which the directors transacted business, the premiums they required, the determination to take none but lives which were almost faultless, the pernicious plan of occasionally resisting the payment of policies, the absence of much opposition, all tended to reduce the business. When, however, the capital of the country increased, and men looked earnestly about them for new modes of investment, the profits and the principles of life assurance were anxiously investigated, its demands inquired into, its difficulties overcome; and though from 1706 to 1806 nine offices had been found sufficient, yet from 1806 to 1846 the desire spread so rapidly, that no less than one hundred and eleven were established. In 1820, there were only twenty offices in the United Kingdom; in 1830, their number was exactly doubled; in 1840, they had again doubled; and from 1840 to 1845, they increased in the same proportion.

The success which has attended these companies has induced capitalists to invest their money in similar schemes, and the result has been, that during every period of excitement new associations have been started, with new claims to patronage. Those claims were put prominently forward to benefit themselves; and life assurance companies cannot greatly benefit their promoters without benefiting others. The constant advertisements, the names of their directors, the statement of their terms, the peculiarity of their constitution, pressed upon general attention, the public mind gradually became possessed with the idea that life insurances were for every class, and business increased. Every objection was met, every demand grappled with; and there is now, probably, not a man in London who cannot, in a smaller or greater degree, provide for those he may leave behind. The principal offices were proprietary; and the entire gain went to the shareholder. But the insurers began to see that the profits made by a corporation might as well be made by themselves; and companies which joined the proprietary with the participating principle followed. Another movement was that which divided the entire profits among the assured, reducing the premium as the company prospered; and so thoroughly is the value of life understood, that a society, commencing on this plan, with fair premiums and fair management, is as safe as a company with a capital of half a million.

But there were other difficulties to be met, as a pernicious plan obtained of disputing the payment of policies when the life fell in, on trivial and often unjustifiable grounds; the advantages of the system being greatly reduced owing to the desire for gain of the proprietary offices. To meet this, a society is now established, termed the Indisputable, which holds the policy inviolable when once granted.

There still remained one class for whom life assurances were unavailing. The anxiety for profits of the companies, the determination to divide good dividends, the extreme desire to take none but unexceptionable lives, produced an evil, at first view, irremediable. The stringent regulations, the declarations required, the personal examination, and the private inquiry, produced an unhappy effect. Average lives were declined, and for him whose health was not perfect, there was no chance. The healthy, but nervous man, whose pulse, when examined, beat like a steam-engine, was very often refused; and stories of rejected applicants, which speak volumes, are prevalent. One gentleman was declined because he was deaf, as he ran more risk of being run over. Another was refused because he had been three times bankrupt, and his system might have suffered. A third was too full of health, and might die of apoplexy. A fourth was deficient, and might die of decline. The old companies were absolutely determined to take no life but what was unexceptionable. The consequence was, that men in rude, robust health, if blind in one eye, or deaf with one ear, were often rejected; and there are innumerable instances of the refused party living to a good old age; while cases are not wanting, in which, after outliving doctor, actuary, and half the board of directors, the very man who, thirty years before, was refused at any price, was gladly taken by the same company at the ordinary premium.

The possessor of sound health, who has provided for his family, cannot comprehend the misery occasioned to the invalid by the conviction that his application will be rejected; and in a country where men labor long in an impure atmosphere, there are too many whose lives are early damaged. To these, every allusion to life assurance was an agony; and it is difficult to enter thoroughly into the distress of him who knew he would die penniless, when a sudden sickness possessed him. Unnerved both mentally and physically, he saw his last hour approach. Loathing the trifling luxuries which sustained him, because they would impoverish his family; dreading the footsteps of the physician, as he thought of his fee; the love of his wife was no comfort, the voices of his children no pleasure; for he knew that his death would leave them to public or private charity. Such was the position of the individual rejected by a life office.

But even this want has been responded to. Many offices now profess to take invalid lives at an increased premium; and two are really devoted to this particular risk. The Invalid and Medical Life Assurance Company first began, and was successful; and the Gresham, lately established, has proved that the class for which it is specially intended is numerous. Much may depend upon the judgment of the medical officer; but so great is the anxiety to insure, that the premium is of less importance to the insured than in ordinary cases, and the office is able to protect its interest. The idea has been supported and approved by actuaries generally. The success of the Gresham is a proof of its merit. Every man of feeling must cordially agree in the principle; and the speech of Mr. Marshall, cashier to the Bank of England, is one of many proofs that the insurance companies, a quarter of a century ago, were ignorant of their own interests.[12]

“I myself,” said that gentleman, “fell under the class of declined lives, and for the whole of my life have been deprived of the advantages which are offered by life assurances. One-and-thirty years ago, I had the misfortune to break a blood vessel in my lungs, and had I proposed to any office, that fact, as an honest man, I must have stated, and that statement would have caused my rejection. From that time to this I have enjoyed perfect health, and I stand before you this evening, a strong and healthy man, a living example of the value of this society, and I present to you a fact, to show that this is likely to be a profitable investment.”

Another society deserves notice, from its admirable plan of uniting a benevolent principle with the benefit derivable from life assurance, and from its addressing a class, to the families of which life assurance is the only barrier against absolute poverty. That class has been hitherto but little thought of, though there is none on whom it would be better bestowed, than on the clerks of England. Industrious, faithful, and intelligent, they are almost compelled, by virtue of their position, to maintain an appearance beyond their means. With incomes which just enable them to pay their debts, and which provide for no contingencies, they are to a great degree incapacitated from insuring their lives; and solacing themselves, therefore, with the idea that a small insurance would be of no avail, they feel that they cannot afford a great one. To this class, therefore, a society which specially provides for its wants is a great benefit; and a kindly feeling between the clerk on the one side, and his superior on the other, is encouraged, to the advantage of both, through the Provident Clerks’ Mutual Life Assurance Association.

Many instances might be given of the value of this society; and the writer trusts that the few lines in which he has honestly and earnestly indulged, for the sake of pointing attention to those offices which he deems deserving notice, may be regarded in the light in which they are written.