of the Bank of England John Francis

“ Audley, like many of our own day, was equally ready to lend money to the gay gallants of the town on annuities, as he was to receive it from the thrifty poor who took, on “the security of the great Audley,” the savings of their youth to secure an annuity for their age. But needy as the youngsters of that day might be, the usurer was as willing as they were needy. He lent them, however, with grave remonstrances on their extravagance, and took the cash they paid him, with an air of paternal regret. ”

“ If it be thought that life assurance offices should, for the sake of the public and of themselves, be interfered with by Government, the next step is to discover the simplest and the least vexatious mode of dealing with them. And here at once arises the question whether some difference should not be made between the mutual and the proprietary company. Assuming that the mutual system possesses every essential element of safety, it is equally true that there are hazards in the path of any company depending merely on its premiums, which do not attend a company with a respectable proprietary. ”

“ As an example of the language that is sometimes indulged in, one modern office promises to set apart a portion of its future profits, whether such should amount to thousands or to tens of thousands, to hundreds of thousands or to millions, for the support and future provision of any person in decay who shall have once, for however brief a space of time, held a single share in such company. “To become a shareholder,” says the prospectus, “is as it were to effect at once and for ever a policy of assurance against want.” ”

“ There are no qualms of conscience in companies; and though a man might try to play upon the easy good nature of his landlord, such tricks would be vain against them. Determined habits of thrift are thus engendered, property becomes more valuable, the landlord receives his rents regularly, and business proceeds like a machine. It [289] may be said that the kindly feeling between landlord and tenant disappears beneath the iron sway of a public company; but however this may be regretted, it is only an inevitable consequence of the changes of capital and the consequent transfer of estates. ”

“ If mercantile or marine assurance were so common, it is difficult to imagine that some approximation to life assurance, however imperfect or normal it might be, was entirely unpractised. It must necessarily have occurred to the captain of a trading vessel, that the storm or the whirlwind, which might send his merchandise to the bottom of the sea, might also send himself with it; and the thought that, if his goods were worth insuring for the benefit of the owners, his own life was worth insuring for the benefit of his family, arose naturally from the risks he ran. ”

“ He knew that if he lived it would be a miserable existence for himself and his wife, and he knew also that if he died by his own hand, not only would his family be placed in a better position than if he lived, but that the men who had wronged him would be outwitted, as the policies on his life would be forfeited, and his bonds become waste paper. ”

“ The company became a theme of public conversation—the assurance offices rejoiced at the discovery of their rival’s infamy—and those who were insured were rudely startled from their dream of security.
In the mean time, Mr. Mackenzie pressed them closely in Glasgow. He defied them and the damages they sought to obtain. There was no word too bad to give them—no assertion which had its foundation in truth, which he was not bold enough to publish. Actions involving damages to the extent of 20,000l. were brought against him in vain—he was indomitable in determination and invincible in spirit. ”

“ In such places [6] disease was ever ready to spring into vigorous life. Every few years, fevers which had been lurking in alleys and ravaging obscure places, devastated the city under various names. At last, that awful sickness which, even at the present day, chills the blood but to think of it, seemed to be naturalised in this country, under the name of the plague; but to it we owe that the initiative step was taken in England, in founding the first principles which govern life assurance, for to it we owe our earliest Bills of Mortality. ”

“ As each office, also, has business special to itself, with its own peculiarities, its own interests, and its own mode of investment, any detailed statement might be dangerous, and form the groundwork for rivals to copy or to criticise. The points of chief note are the capital, the amount of liabilities, and the annual returns; and if the endeavour were made to show the funds in proportion to the risks, instead of endeavouring to procure a large show of business at any price, the object of ambition would be the accumulation of capital. ”

“ In the eighteenth century a company was established, the chief feature in which was the omission of the clause which renders the policy void in the event of suicide. A man went and insured his life, securing the privilege of a free-dying Englishman, and then took the insurers to dine at a tavern to meet several other persons. After dinner he said to the underwriters, “Gentlemen, it is fit you should be acquainted with the company. These honest men are tradesmen, to whom I was in debt, without any means of paying but by your assistance, and now I am your humble servant.” ”

“ A railway sees its capital spent, and is obliged to make farther calls upon its proprietors. An unsuccessful canal company has only the certainty of having fed and demoralised some thousands of stalwart navigators in exchange for the ruin of its shareholders, while the failure of a mine is the melancholy close of many a bright hope. But it is not so bad with a life assurance company. The insured—except in offices originated with a fraudulent design, such as the West Middlesex—has never yet been deceived by the failure of a policy. ”

“ The actuaries, who are intelligent and accomplished gentlemen, must be propitiated, for they are in possession of a somewhat occult science, having justly the ear, the confidence, and the respect of their directors. And when it is borne in mind that these directors embrace, as a body, the first men in the city of London, that they possess a commercial, social, and, not seldom, a political consideration, it follows, that to conciliate them is as necessary to the well-being of any measure, as to conciliate the actuary is necessary to the co-operation of the directors. ”

“ The subject of Life Assurance is so important, that any endeavour to trace its history, however imperfect, may not be unacceptable. Men toil, work, slave, nay, almost sin for their families; they do everything but insure: and should this volume induce any one to avail himself of the benefits of Life Assurance who has not hitherto done so, or should it attract the attention of others who are ignorant of the system, the writer will not deem his labour entirely in vain. ”

“ Neison, to discover the law which governs disease in its relation to life, it follows that any argument against the new companies based on the low character of the lives which they assure, may prove, however specious in theory, very unsound in practice. And the mode adopted by the old offices of conducting their business has certainly, up to the present time, been too much in their own favour. By well-grounded tables they establish the fact that out of 1000 lives, taken at random among the diseased as well as the healthy, a certain number will die each year, until all are extinct. ”

“ The theory of chances is as applicable to commercial transactions as it is to life. The close observer will not have failed to notice that the periodical epidemic—whatever form it may have assumed—has its representative in the commercial crisis. Every six or seven years, mercantile epidemics—analogous to the cholera, the influenza, or the typhus of an unhealthy season—which seem to defy all calculation and to level the lofty as well as the low, revolutionise our money system. ”

“ In proportion as the danger of being taken increases, the premium of insurance advances; and when the place has been so situated, that repeated intelligence could be received of the progress of the siege, I have known the insurance rise to 90l. for the 100l. A fine field this opens for spreading false reports, and making private letters from the Continent. But how infinitely more harmless to trifle with property than to affect the life of a fellow-subject, or to injure him with the public, to serve a private end! ”

“ If contemporary accounts are to be trusted, the ravenous appetite for assurance was something like that which at the present day possesses projectors, as offices were opened in every part of the town. If one company was commenced to insure marriage portions, a second was sure to follow to insure the portions of their children. A mutual life assurance was instantly followed by a mutual ship assurance. ”

“ They roved the seas as if they were its masters; they took the vessels, disposed of the cargo in the nearest market, and sold the navigators like cattle. The only way of mitigating this terrible calamity was by some mode of insurance, to procure their rescue if taken; and we find that to attain so desirable a result they paid a certain premium to their merchant freighters, who, in return, bound themselves to pay a sufficient sum to secure the navigators’ freedom within fifteen days after the certificate of their captivity, the ordinary days of grace being lessened on such policies. ”

“ He was reputed to possess subtle drugs; and it was often noticed that the healthiest of those to whom he was bound to pay life annuities were sometimes cut off in a remarkable way, and that, too, after they had been closeted with him. Whether Lopez granted insurances on lives is unknown, but he lived himself to a bad old age, hated as much as he was feared, and sought after as much as he was despised.
Such men made large profits. They knew nothing and they cared nothing for the chances of life. ”

“ The tables of mortality known as the Northampton were the chief basis on which the various life assurance companies founded their premiums; and, by a singular error, the state adopted the same basis on which to grant annuities for life; but as the most intelligent men of the day were employed in calculating and constructing tables, the Government was scarcely to blame, particularly as they sought no profit, entering into the undertaking solely from a consideration of its advantages to the community. ”

“ The trial and execution of Byng were productive of a similar mania. At each change in his prospects, slight as his chances ever were, the underwriters raised or lowered their premiums, the assurers were elevated or depressed. This victim of the most dastardly ministry that ever misgoverned England, had but little sympathy from the speculators on his life; and it is difficult to say whether their power, importance, and position,—for jobbers and underwriters then were merchants and men of family,—did not in some degree inflame the feeling for blood which had seized the people. ”

“ But, independently of the expenses which eat up the premiums, it may be feared that in an anxious search after business, the examining physician may not be so rigid in his report as those of the older established companies; the lives admitted by the directors, therefore, not being so good as they should be for the ultimate safety of the office. It has been added, in support of this, that in some of these companies the mortality has been 40 per cent. more than it should have been, had proper care been taken. But are we not very ignorant of the laws which govern disease? ”

“ It is no usury, for that here is no lending, but a sale for ever of so much rent for so much money. Likewise, if a private man have 1000l. lying by him, and demandeth for his life and his wife’s life 100l. by the year, and never to demand the principal, it is a bargain of sale and no usury.”
But though these things are evidences of something [39] closely akin to the principles of life assurance, it is certain that no system existed by which so happy a result could be habitually attained. The state of society was opposed to it. Life was then scarce “worth a pin’s fee.” ”

“ Still as the entire tendency of the public has been in favour of the mutual system for the last quarter of a century, as all authorities have proclaimed it to be the purest principle of Life Assurance, as innumerable instances of great success are to be found in its ranks, it follows that an attempt to revert to the pure, proprietary system would be worse than useless. ”

“ The jobbers of Change Alley were not behind; the members of Lloyd’s entered keenly into competition, usurers trembled with delight at the prospect of increasing their store, and annuity-mongers threw [67] themselves with ravenous rapacity on the unwary. Under the name of Africanus, Steele selects a well-known character of the day to satirise the “bites and bubble-mongers” of 1710, in “one who has long been conversant in bartering; who, knowing when Stocks are lowest it is the time to buy, therefore, with much prudence and tranquillity, thinks it the time to purchase an annuity for life.” ”

“ It is true that we cannot yet insure our homes against house-breakers, or our persons from highwaymen; we cannot yet insure our poor population from death if they drink too much rum or Geneva; we certainly have yet no assurance against lying, however necessary it may be in this age of projects; nor have we, like William Helmes, of Exchange Alley, commenced a company to insure female chastity. These were Utopian schemes into which we have not yet entered; but with many of the more practical we are growing familiar. The present “Agricultural Society” answers to that for insuring cattle. ”

“ As mutual offices, therefore, have no other security than their premiums, these would require to be looked after more circumspectly and closely than where a capital and a proprietary are answerable to the insured. The mode in which the funds are invested by mutual offices might be a fair subject for publication; nor would this be an invidious distinction, as an irresponsible office has less claim to an equal latitude of investment, and less right to keep their secrets than a responsible company. ”

“ How far the suggestion of no office being allowed without a large capital, should be carried out, is a very serious consideration. A large paid-up capital does not appear an absolute necessity, although the faith engendered by it would probably repay the assured, because the larger the capital, the greater the confidence, and the greater the power of the subscribers to extend the business, as it does not follow that all the profits should go to the proprietors. ”

“ Unfortunate as these bubble assurance companies might be, unformed and unintelligent as their conductors proved, and ruinous as they were to the people who trusted them, they were a movement in the right direction. The principle of life assurance is so eminently social, and so important to those who wish to invest their savings for their successors, that any effort or endeavour to move this science from the hands of usurers and speculative merchants was to be rejoiced at. ”