RISE AND PROGRESS OF THE EQUITABLE--ITS DANGERS AND ITS
DIFFICULTIES--COMPARATIVE PREMIUMS.--SKETCH OF MR. MORGAN--HIS
OPINIONS.--SINGULAR ATTEMPT TO DEFRAUD THE EQUITABLE--DEATH OF THE
OFFENDER.--ATTEMPT OF GOVERNMENT TO ROB THE OFFICES.
The first meeting of the Equitable Society for the assurance of life
and survivorship “was holden at the White Lion in Cornhill” in 1762,
when only four assurances were effected. In the next four months
their number did not exceed thirty; and so lightly were the prospects
of the institution held by those having authority, that when the
Attorney-General was applied to for an act of incorporation,--“I do not
think the terms are sufficiently high,” was his intelligent opinion,
“to justify me in advising the Crown to grant a charter.”
Such was the commencement of this institution. For many years prior,
the Equitable had been struggling into being, aided by the lectures
of “the justly celebrated Mr. Thomas Simpson,” but yet more by the
strenuous exertion of Edward Rowe Mores, an accomplished antiquarian
and an enlightened gentleman. To his “great pain and travel,” says the
deed of settlement, “the society was indebted for its establishment,”
and in return its promoter was made a director for life with an
annuity of 100_l._[11] Though its board of management included some
of the first bankers and merchants of the day, yet then, as now,
it seemed necessary to catch a peer of the realm to act as decoy,
so Lord Willoughby de Parham, with no interest in its movements or
concern in its affairs, was paraded before the public as patron and
director, and at the end of two years was gravely thanked for the
use of his name in maintaining the reputation of the novel society.
It was probably, however, the working spirits, such as Sir Richard
Glyn[12] and Sir Robert Ladbroke who took charge of its movements, and
who were guilty of, or at any rate were responsible for, the double
dealing which followed; for it is quite in keeping with the commercial
integrity of the eighteenth century, that the directors, fearing its
slow growth would injure its character, gave it the appearance of a
more rapid advance, by adopting the unworthy expedient of calling the
25th policy the 275th, thus inducing the world to understand that the
society consisted of 250 more members than its actual number. Thus the
success of the Equitable institution may be dated from the mendacious
employment of names, and from an absolute deception in the number of
the policies. For many years, an utter indifference was exhibited by
the policy holders about the concerns of the society. It was useless to
advertise a general court, as a sufficient number to form a meeting did
not answer to the call. Nor could a full court be procured until the
cupidity of the members was appealed to, and five guineas were promised
to the first twenty-one who should arrive before twelve o’clock. Then,
and not till then, were the meetings properly attended; a fact which
speaks loudly for the shrewdness of those who devised the scheme, and
the avarice of those who formed the association.
The usual quarrels which depress young institutions, pursued the
Equitable; and twenty-one persons who had contributed to pay the
original expenses made a sudden claim of 15_s._ for every 100_l._
assured. This was resisted by the new members, and “kindled into a
flame that might have destroyed the society, had not the moderation and
good sense of Sir Charles Morgan and a few other sober-minded gentlemen
allayed the fervour of the contending parties, and prevailed on them
to enter into a compromise.” The natural result of this “flame” was to
decrease the number of policies from 564 in 1768, to 490 in 1770, and
it was some time before the assurances were again increased.
There were many reasons for its comparative want of success. There was
an air of mystery about the Equitable which did not become a commercial
institution, and which is now difficult to understand. In December,
1762, a solemn oath was taken by directors and actuary, “never to
discover the names of persons making or applying for assurances,” as if
some unimaginable disgrace attached to it. The terms, notwithstanding
the learned opinion of Mr. Attorney-General, were enormous; for Mr.
Dodson, taking the London Bills of Mortality from 1728 to 1750 as his
foundations, produced premiums so high as to be almost prohibitive.
He had, “for greater security, assumed the probabilities of life in
London during a period of 20 years, which, including the year 1740,
when the mortality was almost equal to that of a plague, rendered such
premiums much higher than they ought to have been, even according to
the ordinary probabilities of life in London itself.”
In addition, there were certain fantastic extreme premiums for fancied
risks: there was “youth hazard,” “female hazard,” and “occupation
hazard”! There was 11 per cent. placed on the premiums of “officers
on half-pay,” and on persons “licensed to retail beer.” There was no
capital on which to fall back, as with the Royal Exchange and London
Assurance; and in addition, the original subscribers claimed all the
entrance money for themselves, so that, altogether, it is no great
wonder there was a lassitude and lack of vigour in the first few years
of the institution. There was also probably more impediment in insuring
with a company than with a jobber, as the underwriters would not be
hedged with the forms and ceremonies which always surround a board of
directors.
The following is a comparative statement of the premiums in 1771, with
those now charged; and though the former may excite a smile, we must
remember that up to this period there had been no attempt whatever to
vary the payments in proportion to age, but that 5 per cent. was still
the accustomed demand for youth and eld:--
Premiums in 1771. Present Premiums.
Age. Male. Female.
_£_ _s._ _d._ _£_ _s._ _d._ _£_ _s._ _d._
14 2 17 0 3 3 11 1 17 7
20 3 9 4 3 14 3 2 3 7
25 3 14 0 4 1 5 2 8 1
30 3 18 7 4 4 4 2 13 4
40 4 17 9 5 4 8 3 8 0
49 6 2 5 6 11 0 4 17 10
In 1769, the continuance of the Equitable must have been very doubtful;
and had it not been for Dr. Price’s treatise, which recommended it to
public notice, it is possible that this beneficial institution would
have been closed. Hitherto its actuaries had been men who knew nothing
about their business. The first, Mr. Mosdell, was a simple accountant;
its second, Mr. Dodson, son of the mathematician, possessed the name,
without the acquirements, of his father; the third, Mr. Edwards, was
sufficiently aware of his own incapacity never to trust to himself; the
fourth was a vice-president, who knew about as much of the art as his
predecessor; nor was it until 1775, when Mr. Morgan was appointed,
through the interest of his uncle, Dr. Price, that any real progress
was made. From this period a new era may be dated; and “the society, no
longer going on from year to year in ignorance and terror, incapable
of deducing any just conclusion as to its real state, became now, by
its more intimate connection with Dr. Price, possessed of ample means
for ascertaining that fact and forming its future measures on the solid
principles of mathematical science.”
In 1776, as Dr. Price urged on the directors the necessity of
decreasing the tables of premiums, declaring them to be exorbitant
and absurd, the female and youth hazard were at once abolished; and
in consequence of an examination of the accounts, all the payments
were reduced one-tenth. In 1780, on the recommendation of the same
gentleman, the Chester and Northampton observations of mortality were
adopted as the basis of the premiums, with an addition of 15 per
cent., because certain directors thought the doctor was lowering the
character of the institution by lowering the charges. In 1786, however,
this 15 per cent. was discontinued, and various additions were made
to the policies, which, like the taste of human flesh to the tiger,
stimulated the proprietors to ask for more.[13] At the next meeting,
ignorance and avarice united to demand a repetition of the bonus; but
the majority decided on investigating the affairs of the society, and
so satisfactory was the result, that a further 2 per cent. was added.
In another two years an addition of 1 per cent. of all insurances of an
earlier date than 1795 was voted; but still the cry was “Give! give!!”
from a few absurd and insatiable proprietors. Success continued to mark
the progress of the society; and by 1815, alarm being manifested lest
it should become unmanageable from its magnitude, a resolution was
passed limiting the participators in the surplus to 5000. Decennial
investigations were agreed to, and the Equitable maintained its
brilliant career. Below is a tabular statement of its progress; but it
would be unjust to close this sketch without a more special allusion
to one whose name was connected with it for upwards of half a century.
Mr. Morgan, nephew to Dr. Price, was, as his name would imply, a native
of the principality. Although originally educated for the medical
profession, he showed so great a tabular aptitude, and evinced so much
facility in the acquirement of mathematical knowledge, that Dr. Price
induced him to relinquish the profession of surgeon for the situation
of actuary to the Equitable; his management of which, seeing it rise
from a capital of a few thousands to many millions, was sound and
judicious; and although the institution contained in itself the germ
of its success, yet Mr. Morgan’s arrangements tended to raise it to a
position of almost national importance. His mathematical attainments
were of the highest order; he contributed important papers to our
scientific publications; he wrote various valuable works on annuities;
and many a reader will call to mind his last few appearances at the
meetings of the Equitable, when, drawn from his retirement, he stood
bravely up to oppose, with the experience of a long life, the rash
innovations of greedy proprietors; when he alluded so modestly to his
past services, and touched so feelingly on that great misfortune, the
death of his “friend, associate, and son,” which had compelled him
to leave his retirement and to appear in defence of those rules and
regulations by which he had conducted the Equitable to a distinguished
success.
At the present time the following warning of this “old man eloquent,”
uttered at one of these meetings, may have an effect in staying the
demand for decreased premiums, annual divisions, and half-yearly
bonuses:--“Can anything be more absurd, or betray greater ignorance,
than to propose an annual profit and loss account in a concern of
this kind, or to regulate the dividend or the call by the success
or failure of each year?... Exclusive of the immense labour of such
an investigation, the events of one year vary so much from those of
another that no general conclusion can be safely deduced from the
experience of so short a term.”
A tradition is current that, very shortly after the establishment of
the office, a fraud was discovered in time to save the society from
loss and to hang the criminal for the attempt. A man named Innes
induced his step-daughter to insure her life with the Equitable for
1000_l._ Soon after this she died, and in proper time Innes produced
a will, duly signed and attested by her, making him executor and
legatee. There were facts connected with her death which seemed morally
to implicate him in a terrible tragedy, but there was nothing which
could be brought home as legal proof. The character of the man, his
eagerness to procure the money, the doubtful circumstances of the case
altogether, made the assurers hesitate, and they took the bold course
of refusing to pay, upon the ground that the will was not a genuine
document. But the man whose character was bad enough to justify such
suspicions, was not likely to lose his money for want of a few false
oaths, so he produced upon the trial one of the attesting witnesses,
who swore that the will was executed in Glasgow, and that he personally
knew the other witness. As Innes, however, undertook to procure further
evidence in his favour, the trial was postponed, and when it came on
a second time every thing went swimmingly on in his favour. His two
confederates, one of them was named Borthwick, were ready to swear
anything and everything. The time, the place, the room, were minutely
described; the scene was graphically painted; and they sat down
satisfied that they had played their parts to perfection. But Innes was
not contented: he wanted the thousand pounds; and resolved to “make
assurance doubly sure,” another person was called, who was to clench
the argument by proving that he saw the deceased person sign the will
in the presence of the two men who had attested the signature. This
witness appeared with fatal effect. Wan and ghastly he is said to have
arisen in the witness-box, and well might he be ghastly who was about
to peril a brother’s life! “My Lord,” he said, “my name is Borthwick.
I am brother to the witness of the same name who has been examined.
_The will was not made on the Bridge-gate at Glasgow, it was forged by
a schoolmaster in the Maze, in the Borough!_” The trial immediately
ceased: “a screw is loose,” said Innes, as in vain he endeavoured to
glide out of court. Of the confederates in this base deed one graced
the pillory, another was imprisoned, Innes himself paid the extreme
penalty of life, the office escaping the meditated fraud.
It is said to be the boast of the Equitable that this was the only case
in which they found it necessary to appeal to law.
Whatever defects may have characterised the constitution of this
Society, it was a great improvement on the arrangements of the Amicable
and the two proprietary companies. It did all that a legitimate life
office could be supposed to do. It assured lives for any number of
years, or for the whole continuance of life. It took the price of the
assurance in one present payment, or it accepted annual premiums. It
allowed annuities to the survivors if they preferred it; and though
the scale might be too high for what we now know, it at least was more
business-like than its contemporaries; for so slow were the latter to
profit by experience, that it was not until the commencement of the
nineteenth century that the Royal Exchange Corporation availed itself
of the Northampton Tables to compute its premiums.
In 1779, Mr. Morgan produced his “Doctrine of Annuities and
Assurances.” This gentleman was the first to detect the inaccuracy
of the rules which Mr. Simpson with others had given to discover the
value of contingent annuities, and which he himself had adopted in the
above work. Notwithstanding the castigation he received from Mr. Baily,
for his “loose and obscure manner,”--for the “grossest errors,”--for
“distorting,”--for “enveloping in mystery,”--for “introducing a
depraved taste in mathematical reasoning,” there is no doubt that his
was the earliest attempt to give correct solutions on the various cases
of deferred annuities which had arisen out of his experience in the
Equitable.
The following additions were made to the policies of the Equitable by
1800:--
_£_ _s._ _d._
For every 100_l._ assured in 1762 258 0 0
” ” 1763 249 10 0
” ” 1764 241 0 0
” ” 1765 232 10 0
” ” 1766 224 0 0
” ” 1767 215 10 0
” ” 1768 207 0 0
” ” 1769 198 10 0
” ” 1770 190 0 0
” ” 1771 181 10 0
” ” 1772 173 0 0
” ” 1773 164 10 0
” ” 1774 156 0 0
” ” 1775 147 10 0
” ” 1776 139 0 0
” ” 1777 130 10 0
” ” 1778 122 0 0
” ” 1779 113 10 0
” ” 1780 105 0 0
” ” 1781 96 10 0
” ” 1782 88 0 0
” ” 1783 81 0 0
” ” 1784 74 0 0
” ” 1785 67 0 0
” ” 1786 60 0 0
” ” 1787 54 0 0
” ” 1788 48 0 0
” ” 1789 42 0 0
” ” 1790 36 0 0
” ” 1791 30 0 0
” ” 1792 24 0 0
” ” 1793 19 0 0
” ” 1794 16 0 0
” ” 1795 13 0 0
” ” 1796 10 0 0
” ” 1797 8 0 0
” ” 1798 6 0 0
” ” 1799 4 0 0
” ” 1800 2 0 0
That a desire for the benefit of insuring was spreading, and that the
commercial relations of the Continent were increasing, may be traced
in the fact that in 1765 his Prussian Majesty granted letters patent
for establishing a chamber of assurance in Berlin for thirty years,
during which period no other assurance office was to be allowed in any
part of Prussia; and during the same year, the free city of Hamburg
established a company for the sale, not only of immediate, but of
deferred annuities.
In 1765, one of those insolent attempts occurred on the part of the
state, which reminds the reader of an absolute, rather than of a
representative, government. The peace concluded in 1763, followed a war
which cost upwards of a hundred millions, and the bribery which was
necessary to carry the treaty through the House, had contributed to
exhaust the treasury. Money was to be acquired, and the people grumbled
at the taxation necessary to raise it. In this dilemma it suddenly
occurred to the ministers that there might be unclaimed property in
the assurance offices, and by some confusion of right and wrong it
was thought just to claim this private property for the public good.
Nothing could more decidedly approach confiscation. But in dealing with
these offices the government was dealing with a large and influential
body of proprietors whose gains were aided by this “dead cash,” and
who were not men to see their purses invaded with impunity. The
Amicable, the Royal Exchange, the London and the Equitable Assurance
Companies numbered among their shareholders the greatest mercantile
names of the day; they were the same men, or of the same generation,
who as directors or as proprietors of the Bank of England resisted,
a few years later, the just demand of William Pitt for the unclaimed
dividends on the national debt; a demand so obviously sound that its
opponents had not an argument to support their refusal. If, then,
they were so vigorous when wrong, it may be imagined that they stood
boldly forward when they were right. Their courage was undaunted,
and they positively defied the claim. The Whigs declared that it was
as barefaced as shutting the Exchequer by the Second Charles; the
Jacobites said they might as well have a Stuart as a Guelph, that
the minister had mistaken his men, and that under no circumstances
would they voluntarily yield. Pamphlets were issued, which distinctly
asserted that no one would trust a government acting so infamously;
that confiscation of private property to pay a nation’s debts was only
one remove from bankruptcy; and that no citizen would lend money to a
government so unprincipled. The propriety and proper feeling of the
people aided the resistance of the offices, and the attempt was only
successful in proving to the state, that all arbitrary power had past
away, and that for the future an honest course would be their best
policy.