But while the institution of life insurance was first care-
fully studied and applied in Great Britain, its greatest growth
has been in the United States, dating chiefly since the Civil
War. A few figures will make clear the extent and rapidity
of this development. Exclusive of annuity contracts, it has
been estimated that the total number of life-insurance policies
in the United States at the beginning of the nineteenth cen-
tury did not exceed one hundred.* By 1860 the companies
reporting to the Insurance Department of the State of New
York showed a total of only 56,000 policies with a face value
of $163,000,000, while the annual premium income amounted
to only $4,700,000 and the assets to $24,000,000. By 1870
the companies authorized to do business in the state of New
York showed the following totals : Annual premium income,
$90,000,000; number of policies, 740,000; face value of in-
surance, $2,000,000,000; and assets $270,000,000. 5 During
the next decade the companies experienced a decline, but following
1880 the business enjoyed a phenomenal and almost
uninterrupted growth.
It is possible to present only approximately the total in-
surance carried by the numerous corporations and associations
now operating in the United States. Some idea, however, of
the present magnitude of the life-insurance business in the
United States may be obtained from the aggregates for the
year 1913, published in the Insurance Year Book. At the
close of that year, it appears that as regards 259 companies
the amount of insurance in force aggregated $20,564,000,000,
the annual premium income $715,000,000 and the total in-
come $925,000,000, the annual payments to policyholders
$468,000,000, and the admitted assets $4,658,000,000. To
these enormous totals, however, it is necessary to add the
business of the numerous fraternal orders which grant in-
surance. At the close of 1913, 509 such orders carried certifi-
cates aggregating $9,622,000,000 while their annual income
amounted to $144,000,000, their annual claims to $101,000,-
000, and their assets to $183,000,000. The vastness of these
figures can scarcely be comprehended. They testify to the
fact that the value of life-insurance protection is rapidly being
recognized by the rank and file of the nation's population.
At present over 32,000,000 policies and fraternal certificates,
aggregating over $30,000,000,000 of insurance, are carried in
the United States, and over $569,000,000 is distributed an-
nually in claims; yet these enormous figures are small com-
pared with what they will be at the close of the next genera-
tion.
Combination of Many Risks into a Group Is Necessary
to Make the Law of Average Apply. Our definition of life
insurance, it will be recalled, involved "the transfer of risks
of many individuals to one person or a group- of persons."
Such a combination of risks is absolutely essential if the busi-
ness is to be established on a basis other than speculation or
gambling. To eliminate the speculative factor it is necessary
to proceed on the theory that the larger the number of separate
risks of a like nature combined into one group, the less un-
certainty -will there be as to the amount of loss that will be
incurred.
