Definition and Extent of Life Insurance. Mankind is
exposed to many serious hazards such as fire, disability and
premature death, the happening of which, from the stand-
point of the individual, it is impossible to foretell or pre-
vent, but the effects of which, such as the loss of property or
earnings, it is highly important to provide against. It is
the function of insurance in its numerous forms to enable in-
dividuals to safeguard themselves against such misfortunes
by having the losses of the unfortunate few paid by the con-
tributions of the many who are exposed to the same risk. If
the hazard under consideration is that of premature death,
the loss suffered is indemnified through life insurance. From
the community standpoint life insurance may be defined as
" that social device for making accumulations to meet uncer-
tain losses through premature death which is carried out
through the transfer of the risks of many individuals to one
person or a group of persons." * From the standpoint of the
individual, however, life insurance may be defined as con-
sisting of a contract, whereby for a stipulated compensation,
called the premium, one party (the insurer) agrees to pay the
other (the insured), or his beneficiary, a fixed sum upon the
happening of death or some other specified event.
Life insurance had its origin much later than the leading
forms of property insurance and its real rise to importance
dates back only about half a century. The first attempts at
associated life insurance, as far as is known, were undertaken
in Great Britain. In 1699 there was formed "the society of
the Economic Theory of Risk and Insurance for Widows and Orphans "
and in 1706 " The Amicable Society for a Perpetual Assurance Office."
It has been estimated that between 1699 and 1720 probably fifty life-
insurance schemes were started in Great Britain, 2 but all were
conducted under methods very defective as compared with
those now in general use; in fact, Mr. Holcombe concludes:
" It may be taken as established that no plan of life insurance
as we now understand it had been contemplated by any com-
pany or society, or had been considered by any legislature in
Europe prior to the year 1760." 3 In 1762, when the total
amount of life insurance in Great Britain is said not to have
exceeded 350,000, the Equitable Assurance Society of London
commenced operations, and this society may be regarded as
the first to use the modern system of insurance, its policies
being issued for fixed amounts and the premiums graded ac-
cording to age.
