History

The History of Insurance | Types of Insurance | Applying for coverage | Insurance Companies

The History of Insurance

The roots of Insurance can be traced back to Babylonia, where traders were encouraged to assume the risk of caravan trade through loans that were repaid (with interest) only after the goods had arrived safely. The practice was given legal standing in the code of Hammurabi (2100 BC). The Phoenicians applied a similar system to their Mediterranean trade. The Romans used burial clubs as a form of life insurance providing funeral expenses for members and later payments to the survivors.

By the 1400’s with the growth of towns and trade in Europe, medieval guilds undertook to protect their members from loss by fire and shipwreck, and to ransom them from capture by pirates (Lloyds of London will underwrite executive kidnap insurance today, interesting how perils have stayed the same) and provide burial and support in times of sickness and poverty. As London became a centre of maritime trade, Lloyd's coffee house was a place where merchants, ship owners, and insurers met to transact business. The company remains active today known around the world for insuring a multitude of risks. Accidental death, but not life insurance, is one of their lines of business.

In 1693 the astronomer Edmond Halley constructed the first mortality table based on the rudimentary laws of statistics and compound interest. The table made it possible to scale the premiums to age, initially the rate had been the same for all ages. All life insurance policies were initially yearly renewable term. A person went to the office of the insurance company; the investors looked at him and asked questions about his health and standing in the community and negotiated a policy good for one year.

Twelve months later the insured would have to come back and renew the policy. Health reassessment sometimes included jumping over the table where the underwriters sat. (Not clearing the hurdle was considered a bad sign.) If the decision was that you were unlikely to survive another 12 months, your coverage was cancelled. The constant renewal process and threat of cancellation resulted in the demand for a policy that would remain in force at a fixed cost until the claim was paid, or for the whole of your life. Thus the "Whole Life" policy was born.

"Show me a man who does not believe in Life Insurance. Let him die once without any. That will change his mind." - Will Rogers

Insurance developed with the rapid growth of British commerce in the 17th and 18th centuries. Prior to the birth of corporations devoted solely to the business of writing insurance policies, contracts were signed by a number of individuals, each of whom wrote his name and the amount of risk he was assuming under the insurance proposal, hence the term underwriter. The Hand in Hand Fire and Life Insurance Company was chartered in 1696. It remains today as a component of Commercial Union Life based in London. The first stock companies to engage in insurance were charted in 1720. By the 1800's companies that were only life insurers were starting in business. The Presbyterian Church of Philadelphia (1759) sponsored the first life insurance corporation in the United States for the benefits of their ministers and dependents. Canada Life opened for business in Toronto in 1840. Britain supplied much of our immigrant base and British insurance ideas followed. As the industry evolved, it became apparent that this was a product that needed to be sold; hence, life insurance agents became an essential part of the sales process.. In the 19th century, many benefit societies were founded to insure the life and health of their members. Some fraternal and religious orders still provide insurance coverage today. Lutheran Life and The International Order of Foresters come to mind but they are small players in a business that requires large amounts of capital to grow and compete. As North America industrialized, employers sponsored group insurance for their employees. Such policies include not only life insurance but sickness, accident and dental benefits and the employees often contribute a percentage of the premiums.

The Canadian life insurance industry established itself 150 years ago. As the country grew, so did the number of companies. By the 1950’s, there were Canadian, US and British companies all competing for business, but by 1990, many foreign companies looked at their growth prospects in a market well served with too many competitors and began to sell out their Canadian operations. With the round of mergers occurring in the last five years, we have an oligopoly of the few. Sunlife, Great West Life and Manulife have swallowed many of the mid-size players. We may see the major banks entering the business. Already Royal Bank is expanding its presence. One constant remains: an agent is still required to find the prospect, determine the need, propose a solution, and motivate the person to put the coverage in force.

Types of Insurance: Term & Payment

Term insurance is coverage for a period or term of time, at the end of the initial period, the policy will renew at a higher cost and there will be an expiry date, usually at an age between 70 and 80. The advantage of term insurance is that you can initially buy lots of coverage at a low initial premium. The disadvantage is that you will likely outlive it. Term cover protects those of us who die too soon. It is priced to pay the claims of people dying before they are supposed to.

Permanent Insurance is the policy that makes a commitment to you. If you keep the policy in force, the company will pay your claim. It is a guarantee of life that we will die. Never at a convenient time, and it will always cost money. Life insurance companies can count on a couple of things. The average life expectancy for men is around 78, for women, 82. If you buy a policy at age 30, you hope that fifty years will go by before the claim is paid.

So your premiums are invested by the company and put into their reserves, bonds and real estate so that the money will be waiting for your inevitable call on it. There are, and have been, and will likely always be arguments by all sorts of experts, real and imagined, about which plan is best. Both have their place in your financial portfolio, it is a question of balance.

Applying for Coverage

So you have to apply for this product. Out comes a large looking form. What should you know? A company has to determine if you are a client that they will accept. As part of the process, we ask questions about you and your health.

The first part is identifying you: address, SIN, work history, current coverage, what plan you want; then the health evidence. You’ll be asked questions such as: “Have you ever…? and “In the past 5 years, have you…?”

Answer each question and tell what was the outcome of any positive answer. More information is better than less. If the person assessing your file is uncertain about a condition, he/she will have to order reports from your doctor and wait for a response. So, if results of a routine test were normal we would want to be sure that all of that is disclosed. If there were tests, let us know what they were and the outcome.

Often a “paramedical exam” is required by the company. The more the risk, age, and amount, the more diligence is required by the underwriter.

What happens in a paramedical exam? A nurse will contact you to schedule an appointment. This is at your convenience: home or office, morning or afternoon. This exam will usually include:

Blood pressure check
Pulse
Height and weight (nurse brings a portable scale)
If a blood profile is required: 2 to 3 vials of blood and a urine specimen are taken

Don’t engage in strenuous exercise prior to the test (this can elevate heart rate). Drink a glass or two of water 30 minutes before the test.

The specimens are sent to a special lab which does only these tests for insurance companies. From your blood and urine specimens, they will check for liver function, kidney profile, cholesterol, nicotine (yes, even one cigarette will show up), cocaine use, and other drugs.

If you use herbal products, note that on your application. Some things, such as betel nuts, can trigger a negative result. It may be best to discontinue their use 6 to 7 days prior to the test. The results are then sent directly to the insurance company. No records are kept by the lab.

The company will often ask for a statement from your doctor. A payment of about $125 to $150 will then allow them to put pen to paper and disclose what they know.

All of this information finally comes together and a judgement is made. Are you a standard risk? If not, can a rated offer be made? Or, can an exclusion be put on the policy, and still allow it to be issued? Sometimes, all that can be offered is nothing. The company cannot determine your life expectancy, or your lifestyle puts you out of the normal limits. They don’t always want to insure someone who drives too fast, climbs mountains, or jumps out of airplanes. If you do intend to engage in risky activities, consider applying for insurance in advance.

Insurance: the magic of averages to the rescue of millions. - Winston Churchill

If you have been declined in the past, depending on the cause, it may be possible to be offered coverage after some years. Also, there are guarantee issue policies for relatively small amounts up to $25,000 with few health questions. The premiums are higher than for standard plans, but they can be issued to many who have had a decline in the past. I may be able to help.

Can't find your Life Insurance Company?

Canadian Life Insurance company mergers and changes of ownership

If you have a policy but are not sure who now manages it, this may help:

Abbey Life: now part of AIG Life Insurance Company of Canada.

Aetna Life: merged with Maritime Life and is now Manulife.

Aeterna Life: taken over by Desjardins Group.

Canada Life: bought by Great West Life in 2003.

Crown Life: bought by Canada Life: now part of Great West Life.

CNA Life: bought by Canada Life: now part of Great West Life.

Colonia Life: taken over by Empire Life.

Confederation Life: individual life insurance contracts and segregated funds bought by Maritime Life: now part of Manulife.

Commercial Union Life: bought by Manulife Financial

Counsel Life: bought by Co-operators Life.

The Credit Life: changed to Union Fidelity Life.

Financial Life: bought by Aetna Life, then Maritime Life, then Manulife.

Gerling Global Life: bought by Maritime Life, then by Manulife.

Glacier National Life: bought by The Bank of Nova Scotia.

Holland Life Insurance Society Ltd: book of business was assumed by Manulife.

Imperial Life: taken over by Desjardins.

Laurentian Life: now part of Desjardins.

Laurier Life: now part of Desjardins.

Liberty Health: now part of Manulife.

London Life: bought by Great West Life but still operates as London Life and markets under the name of Freedom 55 Financial.

Maritime Life was bought by Manulife Financial in 2004.

Mony Life: now part of Transamerica Life.

Monarch Life: now part of Manulife.

Metropolitan Life of Canada: bought by Mutual Life which has since changed its name to Clarica. Mutual Life changed its name to Clarica.

Mutual of Omaha: purchased by RBC Life. (Royal Bank)

North American Life: bought by Manulife.

New York Life: absorbed by Canada Life.

NN Life: bought by Transamerica Life.

Norwich Union: bought by AIG Life Insurance Company of Canada.

Paul Revere Life: Now part of RBC Insurance. (Royal Bank)

Prudential Life Insurance Company of England: bought by Mutual Life which has since changed its name to Clarica.

Royal & SunAlliance: was purchased by Maritime Life; now part of Manulife.

Seaboard Life: now known as Industrial Alliance Pacific Life Insurance Company, still on West Broadway, Vancouver, BC.

Sovereign Life's individual life insurance book of business: assumed by Standard Life.

Sun Alliance: bought by Maritime Life, then by Manulife.

Unum Provident Canada: bought by RBC Life in 2004.

Westbury Life and Canadian General Life: combined became part of RBC Life.

The Federal Civil Service Mutual Benefit Society: taken over by Sun Life.

Toronto Mutual Life: changed its name to Unity Life.

Transamerica Life: was bought by Aegon but continued under the Transamerica Life name.

U.N.A. Life was absorbed by Maritime Life; now part of Manulife.

Western Life changed its name to Unity Life

If you have questions about your policy and do not have an agent servicing the contract, call us. We can likely answer your questions. You may be able to:

• Convert it

• Stop paying and still retain the protection

• Rewrite it on more favourable terms

• Consolidate several policies into one

“The frequency or probability of loss is irrelevant. It must be measured with the magnitude of the outcome”

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