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Life Insurance

This document is intended to provide the reader with an insight into how life insurance operates, how it can be used, the background and regulatory influences which apply.

This guide is broken down into the following areas:

Early life insurance cover

The origins of life insurance can be traced back to the days of the Roman Empire some 2,000 years ago, where burial societies were formed to pay the burial costs of its members. It is thought that the members paid a monthly payment and that cover was on a year by year basis. It is unlikely that any real scientific basis was used in the calculation of the monthly payments.

Trade Guilds sprang up in Britain in the Middle Ages, and tried to provide similar protection for their members against the cost of funeral costs. It is unlikely that there was any scientific basis for the premium calculation.

The first recorded policy in England incepted on the 15 th June 1583 when the office of insurance within the Royal exchange issued a life insurance policy on the life of William Gybbons. The policy was issued to Richard Martin and ran for a 12 month period. William Gybbons dies in the 12 months but the insurers declined to settle the claim, alleging that the policy was for 12 lunar months rather than calendar months. Lunar months are slightly shorter and using that basis William Gybbons would have died outside of the policy period. The matter went to court and the insurers lost. The policy was arranged at a premium of £8 per £100 pound sum insured.

The office of Insurance was a chamber set up to record insurance polices entered into by individual underwriters in case of dispute. This chamber was set up in 1574 but unfortunately much of its records were destroyed in the Great Fire of London in 1666. From what records survive from that period it is thought that these life polices were for short periods running for 12 months or less.

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