Chapter 14: Legal Principles

History of Insurance

Insurable Interest

Before the Life Insurance Act of 1774 in England, people could take out life insurance policies on anyone. After its passage, other governments picked up on it. Now, most states in the US require insurable interest for a policy to be valid.

Leading up to the Life Insurance Act, gambling was quite popular in England. In fact, a common form of betting was on people's lives. Gamblers waged bets on life insurance contracts, usually of public figures. Their value depended on factors that were perceived to affect the life expectancy of the insured.

Public sentiment inevitably turned on this form of gambling. For one, the act was heartless. Second, what was to prevent the untimely death of the insured so the policyholder could collect the death benefit?

A famous example of the latter is the case of Thomas Griffiths Wainewright. He was an artist and writer with a penchant for living way beyond his means. He was deeply in debt, and used forgery to defraud his way to some inheritances. When this was not enough money to cover his debts, Wainewright turned to life insurance policies. He took out a policy on his sister-in-law, and soon increased the coverage substantially. She mysteriously died of poisoning soon after. However, the insurance company refused the payout because of suspicious circumstances. He ended up dying in jail after being convicted of his earlier forgeries.