The Birth of Actuarial Science and Life Insurance, Pt. 2
Jan 10, 2024
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This podcast explores the challenges faced by early insurance companies in the 18th and 19th centuries. It also discusses the origin of actuarial science, the duties of early actuaries, and the contributions of William Morgan. Additionally, it addresses the publication of a more accurate mortality table and the challenges faced by the actuarial sciences and insurance industry in the 20th century.
Actuarial science and insurance have evolved over the years, with advancements in mathematics and the recognition of the need for accurate mortality tables.
The perception of insurance as gambling has influenced the development of regulations, aimed at preventing fraudulent practices associated with betting on the deaths of insured individuals.
Deep dives
The Evolution of Actuarial Science and Insurance
Actuarial science and insurance have evolved over the years, with advancements in mathematics and the recognition of the need for accurate mortality tables. In the 18th and 19th centuries, assurance and insurance societies were established to provide financial protection in case of death. James Dodson played a significant role in creating the first table of annual assurance premiums, laying the foundation for modern actuarial calculations. William Morgan later refined actuarial science and became known as the first actuary, revolutionizing the role with his medical and mathematical expertise. Insurance policies faced controversy due to associations with gambling, leading to the enactment of the Life Assurance Act of 1774 in Britain. Actuarial science continues to adapt to changing circumstances, such as technological advancements and the incorporation of group insurance and pension plans.
The Perception of Insurance as Gambling
The issue of whether insurance is a form of gambling has been debated for centuries. While legally and culturally distinct, there are economic similarities between the two. Insurance involves consideration, prize, and chance, meeting the legal definition of gambling. However, the key distinction is that in insurance, the insured hopes for the events not to occur, whereas in gambling, the gambler hopes for the events to occur. The perception of insurance as gambling has influenced the development of regulations, such as the Life Assurance Act of 1774 in Britain, aimed at preventing fraudulent practices associated with betting on the deaths of insured individuals.
The Transition from Imperial to Metric System in the UK
The UK experienced a transition from the Imperial system to the metric system in the 1970s and 1980s. While schools taught the metric system, the outside world still largely used imperial measurements. This has created a hybrid system for many individuals, where Celsius is used for weather temperatures, but Fahrenheit is preferred for measuring fever in children. Lengths are often measured in millimeters, centimeters, and meters, but long distances are still commonly measured in miles. Cooking and baking involve using both metric and imperial measurements, depending on personal preference and familiarity. The stalled transition has resulted in a mix of measurement systems depending on the context and individual preferences.
Challenges and Growth in Actuarial Science
Actuarial science has faced various challenges and experienced growth throughout the 20th century. The field had to adapt to major events such as two world wars, the influenza epidemic, the Great Depression, and the implementation of social security systems. Furthermore, the rise of group insurance and increased complexity of pension plans required actuaries to incorporate these factors into their calculations. Professional actuarial organizations were established, like the Society of Actuaries in the US, to address the evolving needs of the field. Actuarial science continues to evolve with advancements in technology, increased variables, and the analysis of current events, such as the impacts of the COVID-19 pandemic.
As life insurance and assurance became more common, companies that offered coverage ran into in problems in the 18th and 19th century. Part 2 also covers how Insurance has been used by gamblers as a grisly amusement.
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