John Francis.

Annals, anecdotes, and legends [microform] : a chronicle of life assurance online

. (page 7 of 23)
Online LibraryJohn FrancisAnnals, anecdotes, and legends [microform] : a chronicle of life assurance → online text (page 7 of 23)
Font size
QR-code for this ebook


produced a volume " On the Nature and the Laws of
Chance;" in 1742, this was followed by his " Doctrine
of Annuities and Reversions," deduced from general
and evident principles, with tables showing the value
of joint and single lives. In 1752, he made an
additional contribution to the statistics of annuities, as
he published in his '' Select Exercises " a supplement,
wherein he gave new tables of the values of annuities
on two joint lives, and on the survivor of two lives,
more copious than hitherto. He first attempted to
compute the value of joint lives ; but as these were
still taken from the London Bills of Mortality, they
were by no means fit for general acceptance. He



Digitized by VjOOQ IC



llAISING THE DEVIL. 105

treated his subject, however, more broadly and clearly
than it had been previously treated, giving some of
the best tables of the values of life annuities, which
were published for many years. Though the manner
in which they might be computed had been shown
by Dr. Halley, it is to the self-taught Simpson we
are indebted for their practical application.

In 1760, M. Buffon published a further con-
tribution to the statistics of assurance, in a table of
the probabilities of life, estimated from the mortality
bills of three parishes in Paris, and two country
parishes in its neighbourhood.

The following are some of his calculations : — *' By
this table," says the author, " we may bet 1 to 1
that a new-bom infant will live 8 years ; that a child
of one year old will live 33 years more, that a child
of full two years old will live 33 years and 5 months
more, that a man of thirty will live 28 years more ;
that a man of forty will live 22 years longer, and so
through the other ages."

Buffon adds, ^^ The age at which the longest life is
to be expected is 7, because we may lay an equal
wager, or 1 to 1, that a child of that age will live
42 years and 3 months longer. That at the age of
twelve or thirteen, we have lived a fourth part of our



Digitized by VjOOQ IC



106 ANNALS, ETC. OP LIPB ASSURANCE.

life, because we cannot reasonably expect to live
38 or 39 years longer ; that in like manner at the
age of 28 or 29, we have lived one-half of our life,
because we have but 28 years more to live; and
lastly, that before fifty we have lived three-fourths of
our life, because we can hope but for 16 or 17 years
more."

Some profound moral reflections followed these
estimates ; and as a critic of the day ^^ thought all
serious remarks out of place in an arithmetical
calculation, and that M. Buffon had better reserve
them for his book on beasts,*' the reader will not be
troubled with their repetition. He will not, however,
be displeased to read the remarks on this table, by
one of the annotators of the day.

"'For insuring for 1 year the life of a child of
three years old we ought to pay 10 per cent, for as it
has by M. Buffon's table an equal chance of living
40 years, it is 40 to 1 that it does not die in a year.
In the same manner we ought to pay but 3 per cent,
for insuring for 1 year tie life of a lad of nineteen
or twenty ; but 4 per cent, for insuring for 1 year
the life of a man of thirty-five ; and 5 per cent, per
annum for insuring for 1 year the life of a man of
forty*three; after which the insurances ought to



Digitized by VjOOQ IC



BUPPON AND HIS CRITICS. 107

rise aboye 5 per cent, in proportion to the advance
of a person's age above forty-three. So that a man
of seventy-seven ought to pay 25 per cent, and a
man of eighty-five 33 1 per cent, for insuring his life
for 1 year.**



Digitized by VjOOQ IC



108



CHAP. vn.

RISE AND PROGRESS OF THE EQUITABLE — ITS DANGERS AND ITS
DIFFICULTIES — COMPARATIVE PREMIUMS. — SKETCH OF MR.
MORGAN — HIS OPINIONS. — SINGULAR ATTEMPT TO DEFRAUD THE
EQUITABLE — ^DEATH OF THE OFFENDER. ~ ATTEMPT OF GOVERN-
MENT TO ROB THE OFFICES.

The first meeting of the Equitable Society for
the assurance of life and survivorship " was holden at
the White Lion in Comhill " in 1762, when only
four assurances were effected. In the next four
months their number did not exceed thirty ; and so
lightly were the prospects of the institution held by
those having authority, that when the Attorney-
General was applied to for an act of incorporation, —
" I do not think the terms are sufficiently high," was
his intelligent opinion, " to justify me in advising the
Crown to grant a charter."

Such was the commencement of this institution.
For many years prior, the Equitable had been
struggling into being, aided by the lectures of " the
justly celebrated Mr. Thomas Simpson," but yet



Digitized by VjOOQIC



THE EQUITABLE AND SIR BICHARD GLTN. 109

more by the strenuous exertion of Edward Kowe
Mores^ an accomplished antiquarian and an enlight-
ened gentleman. To his " great pain and travel,"
says the deed of settlement, " the society was indebted
for its establishment," and in return its promoter was
made a director for life with an annuity of 100/,^
Though its board of management included some of
the first bankers and merchants of the day, yet then,
as now, it seemed necessary to catch a peer of the
realm to act as decoy, so Lord Willoughby de
Parham, with no interest in its movements or concern
in its affairs, was paraded before the public as patron
and director, and at the end of two years was gravely
thanked for the use of his name in maintaining the
reputation of the novel society. It- was probably,
however, the working spirits, such as Sir Bichard
Glyn t and Sir Robert Ladbroke who took charge



* In 1768, Mr. Mores quarrelled with and separated from the
society.

f Sir Richard was a notability of those days, and divided
civic popularity with Beckford, whose colleague he was in the
representation of London in 1761. He was made Doctor of
Civil Laws by Oxford University, a custom which would have
been perhaps more honoured in the breach than the observ-
ance ; and we owe Blackfriars* Bridge greatly to the energy
and exertions of Sir Richard Glyn, Knight, Baronet, and Lord
Mayor, and — more honourable title still, — director of our first



Digitized by VjOOQ IC



110 ANNAL8, ETC, OP LIFE ASSURANCE.

of its movements, and who were guilty of, or at any
rate were responsible for, the double dealing which
followed ; for it is quite in keeping with the com-
mercial integrity of the eighteenth century, that the
directors, fearing its slow growth would injure its
character, gave it the appearance (^ a more rapid
advance, by adopting the unworthy expedient of
calling the 25th policy the 275th, thus inducing the
wcn-ld to understand that the society consisted of 250
more members than its actual number. Thus the
success of the Equitable institution may be dated
from the mendacious employment of names, and firom
an absolute deception in the number of the policies;
For many years, an utter indifference was exhibited
by the policy holders about the concerns of the
society. It was useless to advertise a general court,
as a sufficient number to form a meeting did
not answer to the call. Nor could a full court
be procured until the cupidity of the members was
appealed to, and five guineas were promised to the
first twenty-one who should arrive before twelve
o'clock. Then, and not till then, were the meetings
properly attended; a fact which speaks loudly for the

pardj mutual life assurance office. We look in vain for suck
names as Glyn, Gosling, Ladbroke, or Beckfbrd, among the
sherifis and iddermen of the present day.



Digitized by VjOOQ IC



DECBPTION OF THE DIBECT0B8. Ill

shreTrdness of those who devised the scheme^ and the
avarice of those who formed the associatioii.

The usual quarrels which depress young in-
stitutionsy pursued the Equitable; and twenty-one
persons who had contributed to pay the original
expenses made a sudden claim of 1 5s. for every
lOOL assured. This was resisted by the new mem-
bers^ and ^^ kindled into a flame that might have
destroyed the society^ had not the moderation and
good sense of Sir Charles Morgan and a few other
sober-minded gentlemen allayed the fervour of the
contending parties, and prevailed on them to enter
into a compromise." The natural result of this
" flame " was to decrease the number of policies from
564 in 1768, to 490 in 1770, and it was some time
before the assurances were again increased.

There were many reasons for its comparative want
of success. There was an air of mystery about the
Equitable which did not become a commercial insti-
tution, and which is now difficult to understand. In
December, 1762, a scdemn oath was ti^en by
directors and actuary, ** never to discover the names
of persons making or applying for assurances," as if
some unimaginable disgrace attached to it. The
terms, notwithstanding the learned opinion of Mr.
Attorney-General, were enormous ; for Mr. Dodson,



Digitized by VjOOQ IC



112 ANNALS, ETC. OF LIFE ASSURANCE.

taking the London Bills of Mortality from 1728 to
1750 as his foundations, produced premiums so high
as to be almost prohibitive. He had, " for greater
security, assumed the probabilities of life in London
during a period of 20 years, which, including the
year 1740, when the mortality was almost equal to
that of a plague, rendered such premiums much higher
than they ought to have been, even according to the
ordinary probabilities of life in London itself."

In addition, there were certain fantastic extreme
premiums for fancied risks: there was ** youth hazard,"
" female hazard," and ** occupation hazard" ! There
was 11 per cent, placed on the premiums of " officers
on half-pay," and on persons " licensed to retail
beer." There was no capital on which to fall back,
as with the Koyal Exchange and London Assurance ;
and in addition, the original subscribers claimed all
the entrance money for themselves, so that, altogether,
it is no great wonder there was a lassitude and lack
of vigour in the first few years of the institution.
There was also probably more impediment in in-
suring with a company than with a jobber, as the
underwriters would not be hedged with the forms
and ceremonies which always surround a board of
directors.

The following is a comparative statement of the



Digitized by VjOOQ IC



COMPABATIVE FBEMIUMS. 113

premiums in 1771, with those now charged; and
though the former may excite a smile, we must re-
member that up to this period there had been no
attempt whatever to vary the payments in proportion
to age, but that 5 per cent, was still the accustomed
demand for youth and eld : —



\ge.




Premiumainini.:!
Male. Female.


Present Premiums


14


.


£ ». d,

2 17


.


£ *. d,
3 3 11


£ s. d.

1 17 7


20


-


3 9 4


-


3 14 3


2 3 7


25


-


3 14





4 1 5


2 8 1


80





3 18 7





4 4 4


2 13 4


40


-


4 17 9


-


5 4 8


3 8


49





6 2 5


-


6 11


4 17 10



In 1769, the continuance of the Equitable must
have been very doubtful ; and had it not been for
Dr. Price's treatise, which recommended it to public
nptice, it is possible that this beneficial institution
would have been closed. Hitherto its actuaries had
been men who knew nothing about their business.
The first, Mr. Mosdell, was a simple accountant ; its
second, Mr. Dodson, son of the mathematician, pos-
sessed the name, without the acquirements, of his
father; the third, Mr. Edwards, was suflSciently
aware of his own incapacity never to trust to himself;
the fourth was a vice-president, who knew about as
much of the art as his predecessor ; nor was it until

I



Digitized by VjOOQ IC



114 ANNALS, ETC. OF LIFE ASSURANCE,

1775, when Mr. Morgan was appointed, through the
interest of his uncle, Dr. Price, that any real pro-
gress was made. From this period a new era may
be dated ; and *' the society, no longer going on from
year to year in ignorance and terror, incapable of de-
ducing any just conclusion as to its real state, became
now, by its more intimate connection with Dr. Price,
possessed of ample means for ascertaining that fact
and forming its future measures on the solid prin-
ciples of mathematical science."

In 1776, as Dr. Price urged on the directors the
necessity of decreasing the tables of premiums, de-
claring them to be exorbitant and absurd, the female
and youth hazard were at once abolished; and in
consequence of an examination of the accounts, all
the payments were reduced one-tenth. In 1780, on
the recommendation of the same gentleman, the
Chester and Northampton observations of mortality
were adopted as the basis of the premiums, with an
addition of 15 per cent., because certain directors
thought the doctor was lowering the character of
the institution by lowering the charges. In 1766,
however, this 15 per cent, was discontinued, and
various additions were made to the policies, which,
like the taste of human flesh to the tiger, stimulated



Digitized by VjOOQ IC



APPOINTMENT OF MR. MORGAN. 115

the proprietors to ask for more,* At the next meeting,
ignorance and avarice united to demand a repetition
of the bonus ; but the majority decided on investi-
gating the affairs of the society, and so satisfactory
was the result, that a further 2 per cent was added.
In another two years an addition of 1 per cent, of all
insurances of an earlier date than 1795 was voted;
but still the cry was " Give I give I !" from a few ab-
surd and insatiable proprietors. Success continued
to mark the progress of the society; and by 1815,
alarm being manifested lest it should become un-
manageable from its magnitude, a resolution was
passed limiting the participators in the surplus to
5000. Decennial investigations were agreed to, and
the Equitable maintained its brilliant career. Below
is a tabular statement of its progress ; but it would
be unjust to close this sketch without a more special
allusion to one whose name was connected with it for
upwards of half a century. Mr. Morgan, nephew to
Dr. Price, was, as his name would imply, a native of
the principality. Although originally educated for
the medical profession, he showed so great a tabular

* That thtf safety of this Society was doubtful may be
partly judged from the fact, that half the policies issued within
the first twenty-five years had been abandoned, probably from
doubt of their ultimate payment.

I 2



Digitized by VjOOQ IC



116 ANNALS, ETC. OF LIFE ASSURANCE.

aptitude, and evinced so much facility in the acquire-
ment of mathematical knowledge, that Dr. Price
induced him to relinquish the profession of surgeon
for the situation of actuary to the Equitable; his
management of which^ seeing it rise from a capital of
a few thousands to many millions, was sound and judi-
cious ; and although the institution contained in itself
the germ of its success, yet Mr. Morgan's arrange-
ments tended to raise it to a position of almost
national importance. His mathematical attainments
were of the highest order; he contributed important
papers to our scientific publications ; he wrote various
valuable works on annuities ; and many a reader will
call to mind his last few appearances at the meetings
of the Equitable, when, drawn from his retirement,
he stood bravely up to oppose, with the experience of
along life, the rash innovations of greedy proprietors;
when he alluded so modestly to his past services, and
touched so feelingly on that great misfortune, the
death of his " friend, associate, and son," which had
compelled him to leave his retirement and to appear
in defence of those rules and regulations by which he
had conducted the Equitable to a distingushed success.
At the present time the following warbing of this
" old man eloquent," uttered at one of these meet-
ings, may have an effect in staying the demand for



Digitized by VjOOQ IC



INNES AND HIS STEP-DAUGHTER. 117

decreased premiums^ annual divisions, and half-yearly
bonuses : — ^^ Can anything be more absurd, or betray
greater ignorance, than to propose an annual profit
and loss account in a concern of this kind, or to
regulate the dividend or the call by the success or
failure of each year? ... Exclusive of the immense
labour of such an investigation, the events of one
year vary so much from those of another that no
general conclusion can be safely deduced from the
experience of so short a term."

A tradition is current that, very shortly after the
establishment of the office, a fraud was discovered
in time to save the society from loss and to hang
the criminal for the attempt. A man named Innes
induced his btep-daughter to insure her life with the
Equitable for 1000/. Soon after this she died, and in
proper time Innes produced a will, duly signed and
attested by her, making him executor and legatee.
There were facts connected with her death which
seemed morally to implicate him in a terrible tragedy,
but there was nothing which could be brought
home as legal proof. The character of the man, his
eagerness to procure the money, the doubtful cir-
cumstances of the case altogether, made the assurers
hesitate, and they took the bold course of refusing to
pay, upon the ground that the will was not a genuine

I 3



Digitized by VjOOQ IC



118 ANNALS, ETC. OF LIFE ASSURANCE.

document. But the man whose character was bad
enough to justify such suspicions, was not likely to
lose his money for want of a few false oaths, so he
produced upon the trial one of the attesting wit-
nesses, who swore that the will was executed in
Glasgow, and that he personally knew the other
witness. As Innes, however, undertook to procure
further evidence in his favour, the trial was post-
poned, and when it came on a second time every
thing went swimmingly on in his favour. His two
confederates, one of them was named Borthwick, were
ready to swear anything and everything. The time,
the place, the room, were minutely described; the
scene was graphically painted; and they sat down
satisfied that they had played their parts to perfec-
tion. But Innes was not contented : he wanted the
thousand pounds; and resolved to **make assurance
doubly sure," another person was called, who was to
clench the argument by proving that he saw the
deceased person sign the will in the presence of the
two men who had attested the signature. This wit-
ness appeared with fatal effect. Wan and ghastly
he is said to have arisen in the witness-box, and well
might he be ghastly who was about to peril a
brother's life ! " My Lord," he said, " my name is
Borthwick. I am brother to the witness of the



Digitized by VjOOQ IC



PUNISHMENT OP A FOBGEB. 119

same name who has been examined. The will was
not made on the Bridge-gate at Glgsgow^ it was forged
by a schoolmaster in the Maze^ in the Borough V'*
The trial immediately ceased: *'a screw is loose,"
said Innes, as in vain he endeavoured to glide out
of court. Of the confederates in this base deed one
graced the pillory, another was imprisoned, Innes
himself paid the extreme penalty of life, the office
escaping the meditated fraud.

It is said to be the boast of the Equitable that
this was the only case in which they found it neces-
sary to appeal to law.

Whatever defects may have characterised the con-
stitution of this Society, it was a great improvement
on the arrangements of the Amicable and the two
proprietary companies. It did all that a legitimate
life office could be supposed to do. It assured lives
for any number of years, or for the whole continuance
of life. It took the price of the assurance in one
present payment, or it accepted annual premiums.
It allowed annuities to the survivors if they preferred
it ; and though the scale might be too high for what
we now know, it at least was more business-like than
its contemporaries; for so slow were the latter to
profit by experience, that it was not until the com-
mencement of the nineteenth century that the Royal

I 4



Digitized by VjOOQ IC



120 ANNALS, ETC. OP LIFE A8SUKANCE.

Exchange Corporation availed itself of the North-
ampton Tables to compute its premiums.

In 1 779, Mr. Morgan produced his ** Doctrine of
Annuities and Assurances." This gentleman was the
first to detect the inaccuracy of the rules which
Mr. Simpson with others had given to discover the
value of contingent annuities, and which he himself
had adopted in the above work. Notwithstanding
the castigation he received from Mr. Baily, for his
" loose and obscure manner," — for the " grossest
errors," — for "distorting," — for "enveloping in mys-
tery," — for " introducing a depraved taste in mathe-
matical reasoning," there is no doubt that his was
the earliest attempt to give correct solutions on
the various cases of deferred annuities which had
arisen out of his experience in the Equitable.

The following additions were made to the policies
of the Equitable by 1800 : —















£ t. d.


For every


lOOZ.


assured


in 1762





.


258


»»




»


1763


.


-


249 10


n




n


1764


-


-


241


n




n


1765


.





232 10


»»




«


1766


-


-


224


«






1767


-


-


215 10


»>






1768


.


m


207


»»






1769


-


-


198 10









1770


-


-


190


u






1771





«


181 10



Digitized by VjOOQ IC



ADDITION TO POLICIES.



121



For every 100/. assured in







£


». rf.


1772


>


173





1773


-


164 10


1774


-


156





1775


.


147 10


1776


-


139





1777


.


130


10


1778


.


122





1779


-


113


10


1780





105





1781


-


96


10


1782


>


88





1783


.


81





1784


.


74





1785


-


67





1786


.


60





1787


.


54





1788


.


48





1789


-


42





1790


-


36





1791


.


30





1792


-


24





1793


.


19





1794


-


16





1795


-


13





1796


-


10





1797


.


8





1798


.


6





1799





4





1800


.


2






That a desire for the benefit of insuring was
spreading^ and that the commercial relations of the
Continent were increasing, may be traced in the fact
that in 1765 bis Prussian Majesty granted letters



Digitized by VjOOQ IC



122 ANNALS, ETC. OF LIFE ASSURANCE.

patent for establishing a chamber of assurance in
Berlin for thirty years, during which period no other
assurance office was to be allowed in any part of
Prussia ; and during the same year, the free city of
Hamburg established a company for the sale, not
only of immediate, but of deferred annuities.

, In 1765, one of those insolent attempts occurred
on the part of the state> which reminds the reader
of an absolute, rather than of a representative,
government. The peace concluded in 1763, followed
a war which cost upwards of a hundred millions, and
the bribery which was necessary to carry the treaty
through the House, had contributed to exhaust the
treasury. Money was to be acquired, and the people
grumbled at the taxation necessary to raise it. In
this dilemma it suddenly occurred to the ministers
that there might be unclaimed property in the
assurance offices, and by some confusion of right and
wrong it was thought just to claim this private pro-
perty for the public good. Nothing could more
decidedly approach confiscation. But in dealing
with these offices the government was dealing with
a large and influential body of proprietors whose
gains were aided by this " dead cash," and who were
not men to see their purses invaded with impunity.
The Amicable, the Royal Exchange, the London



Digitized by VjOOQ IC



UNJUST DEMAND OF GOVERNMENT. 123

and the Equitable Assurance Companies numbered
among their shareholders the greatest mercantile
names of the day ; they were the same men^ or of
the same generation, who as directors or as pro-
prietors of the Bank of England resisted, a few years
later, the just demand of William Pitt for the
unclaimed dividends on the national debt ; a demand
so obviously sound that its opponents had not an
argument to support their refusal. If, then, they
were so vigorous when wrong, it may be imagined
that they stood boldly forward when they were
right. Their courage was undaunted, and they posi-
tively defied the claim. The Whigs declared that it
was as barefaced as shutting the Exchequer by the
Second Charles; the Jacobites said they might as
well have a Stuart as a Guelph, that the minister
had mistaken his men, and that under no circum-


1 2 3 4 5 7 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Online LibraryJohn FrancisAnnals, anecdotes, and legends [microform] : a chronicle of life assurance → online text (page 7 of 23)