Life Insurance Companies: Scamming Since 1583

Life insurance, like the lottery, seems like a pretty big scam until it pays off.  Basically, you pay people money so that they can give money to other people if you happen to die.  Which seems like a huge waste of money, unless you end up having to pay for someone's funeral, in which case life insurance is a pretty great thing for someone to have had.  But who started the whole life insurance thing?

Well, the first recorded case of a life insurance policy comes to us courtesy of London, England in 1583.  An alderman in London named Richard Martin took out a life insurance policy on a salter named William Gibbons.  Why?  I have no idea.  I can't find any trace of a reason, although if I spent more time, maybe I could.  Anyways...

One June 18th, Martin paid an 8% premium for a twelve month policy which cost him £383, which means that if Gibbons died within the twelve month period, Martin would get around £4,800.  Which back in the 1500's was a crap-ton of money.  The average person's daily wage was 10 pennies (remember, this was back when there were denominations under the penny, such as the farthing, which was worth 1/4penny), and there were 12pennies to a shilling, and 20shillings to a pound.  That means the average person was earning about 1/24th of a £ a day.  Which means the insurance policy on Gibbons was worth over 300years worth of the average salary of the day.  I have no idea why you'd insure the life of a salt merchant for so much, but maybe Martin was a gambling man who knew something the insurance folk didn't.

Either way, Gibbons died on May 29th, 1584, well within a year.  Unless, of course, you're an insurance company that's suddenly out enough money to pay Leonidas' Spartan army for a year.  If you're that insurance company, suddenly you have to get creative.

"The policy wasn't for a year," you say, "It was for 12 months."

Big deal.  What's the difference?

"Well," you say, "A year is 365 days, nobody's arguing that.  But 12 months is 12 increments of 28days, since the shortest month is 28 days.  So a 12 month policy is only 336 days.  Mr. Gibbons died 345 days after the policy started, well after the 12 month policy ended."

Needless to say, Martin took them to court.  The man that the Queen had put in charge of insurance, Richard Chandler, agreed with Martin, as did the mayor of London.  Despite that, it took three years for the courts to finally settle the affair and all the appeals.  In 1587 the Admiralty Court (I don't know why they were involved, honestly) finally settled the affair in favour of Martin and Gibbons' dependents.

Life insurance companies: The only ones allowed to try and screw you when you're dead.

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Sources:
Average salary info taken from AbsoluteShakespeare.com
Pre-decimal British coin values taken from Wikipedia page on Coins of the Pound Sterling
HistoryOrb.com entry for 1583
BrainyHistory.com page on June 18
Information-Britain.co.uk page on the first UK life insurance policy
Minor edits to shift the blame from insurance agents to where it belongs: Insurance companies