The perils of everyday life before the Industrial Revolution were challenging for many. During those times, there was a limited variety of foods. Having enough to sustain yourself and your family relied heavily on unpredictable variables like weather, animal diseases, crops, and human conflicts. It was also difficult to safely and reliably store the food you did have. During that time, organized government assistant programs were nonexistent. Medical care was based heavily on the belief that a little blood-letting went a long way, no matter your ailment. Many people died from preventable diseases or infections.
From the earliest times, humans have always attempted to come together during the hardships of life to offer each other mutually beneficial assistance arrangements. When one became ill or died before the Industrial Revolution, family, friends, orphanages, guilds, or fellow workers would ease the burden. Despite this support, it often wasn’t enough or unavailable, and those facing hardships were often left without aid. With changes to urbanization, commerce, the use of money, social demographics, and the eventual arrival of the Industrial Revolution, a more sophisticated method of risk pooling became both necessary and possible.
How life insurance came to be
Today, we know insurance is an easy-to-purchase risk-transfer tool, providing the policyholder or beneficiary an economic benefit if the insured item (car, house, human life) is lost, broken, or destroyed. But it did not start this way.
As far back as the Roman Empire, ship owners would come together to share the risk of a sea voyage, including shipwreck and piracy, by agreeing to share the costs of a loss should an unlucky merchant find their ship not returning from an expedition. This process eventually became more formal and organized in the late 1600s when Edward Lloyd opened his London coffeehouse. Wealthy merchants and ship owners would come together and make agreements to protect the cargo on their ships. A piece of paper passed around the coffeehouse outlined the details of each risk. Merchants would sign their names, signifying their willingness to share a portion of the risk for a share of each ship owner’s premiums.
The first life insurance policy
The very first known life insurance policy was written in 1582 in England for William Gybbons. Sadly, it also led to the first life insurance death claim. The policy was purchased by Richard Martin, a regular citizen and alderman (an English member of council) for one year. It cost 400 pounds sterling with a premium of 8%. Mr. Gybbons did not survive the year.
At the time, the frequency of widespread plagues during the 17th and 18th centuries, insurance companies were reluctant to issue insurance policies for periods of more than one year.
However, as hygiene, medicine, and public health increased (only two centuries following Mr. Gybbon’s death), insurance plans that provided the necessary protection for the people on an affordable and widely offered basis became commonplace.
The first Canadian company to begin offering mutual benefit life insurance was known as the Canada Life Assurance Company and was founded in 1847. By 1910, 43 companies were licensed by the federal government to transact life insurance business in Canada. The life insurance industry has continued to expand in Canada over the years bringing with it new products and services being added to fit the needs of Canadians.