The International Life Assurance Society was a 19th-century British insurance company. Its operations in the United States, particularly in the state of Massachusetts, caused it to play a major role in the development of insurance regulation in that country.
The Society was founded in 1837 under its original name, the National Loan Fund Life Assurance Society. The "Loan Fund" part of the name reflected the Society's practice of allowing insureds to borrow back a portion of their premiums, an unusual feature in its day but one that is now commonly practiced in the form of "policy loans". From the very start, the Society established a presence in the major cities of Britain and, within ten years, had done the same in Canada and the United States. By the mid 1850s, the Society had become the sixth largest insurance company in the United States and, by far, the largest British insurer operating there.
Signs of financial difficulties arose in the early 1850s. By then, the Society had changed its operating practices to reduce the amount of funds that could be borrowed by the policyholders. At about the same time, the Society's founder (T. Lamie Murray) left his leadership position, not only in the Society but also in a related enterprise (the Equitable Fire Insurance Company), doing so amidst allegations of financial improprieties. And towards the end of the decade, the Society faced difficulties from a different front. A new Massachusetts law required insurers to demonstrate that they were holding assets sufficient to meet their obligations to policyholders. The International was unable to satisfy the Massachusetts authorities on this point, largely because it insisted on using an actuarial methodology that was unacceptable to those authorities. This, in turn, sparked a debate that was played out in the general newspapers in the United States.
Similar difficulties soon arose with the newly established insurance department of New York. This, along with generally difficult conditions related to the American Civil War, caused the Society to cease most of its operations in the United States by the mid 1860s. A few years later, the Society was placed under court-supervised liquidation in London. It ceased independent operations in 1869.
Throughout its existence, the Society was a party to various insurance-related litigation with policyholders or their beneficiaries. Several of those cases served to establish precedent in the application of insurance law. The most notable of them was Molton v. Camroux, which addressed the question of how contract law is applied in cases of insanity.
Early years Founding of the company The National Loan Fund Life Assurance Society was organized in 1837 by Thomas Lamie Murray, an Irish banker who was also serving as the founder and director of the recently established National Bank of Ireland. The society's initial investment group included nine Londoners drawn from fields outside the banking or insurance industries, two of whom were John Elliotson and Robert Hollond. These nine, plus Murray, became the Society's initial corps of officers and directors. The society's existence as a corporate entity was acknowledged by an act of Parliament, the National Loan Fund Life Assurance Society Act 1838 (1 & 2 Vict. c. xcii), in July 1838, for which royal assent came later that same month.Relevant dates in the company's early history are given in the transcript of its initial shareholders meeting, published at An abridged version of the transcript appears at The legislative history of the Act to enable the National Loan Fund Life Assurance Society ... appears in Volume 93 of the Journals of the House of Commons. It was enacted on July 25, 1838, as Local Act c. 92 of 1838 (1&2 Vict) and received royal assent on July 27. See page 752 of the Journals for the enactment and page 758 for the royal assent.
Shares in the society were priced at £10 each and ownership was divided across 50,000 shares. Accordingly, the company's paid-in capital was intended to be £500,000 (equivalent to about $ million in current U.S. dollars).The estimated equivalency in 2016 U.S. dollars is based on the estimates of 19th-century consumer price indexes provided on the website of the Minneapolis Federal Reserve Bank (available here ), along with the standard 19th-century assumption that £1 was then equivalent to approximately $5. However, investors were required to pay only £2.25 (i.e., two pounds and five shillings) when "subscribing" and fewer than half the shares were actually subscribed. A financial report from 1852 (i.e., fifteen years after establishment of the society) showed paid-in capital of about £50,000, despite the fact that the society's promotional material from the very beginning typically described the company as possessing the full £500,000.Massachusetts Insurance Reports, pages 44-46. For one example of stating possession of the full £500,000, see the inside front cover of the Halifax Brochure.
Under the society's deed of settlement, Murray was to be the chairman of the board of directors and could not be ousted from the position. He was also guaranteed, in addition to his salary as an officer and director, a lifetime annual payment of 5% of the company's profits, with a further guarantee that if he died during the first 28 years, payments would continue to be made to his heirs for the remainder of that 28-year period. In addition, Murray was to receive a one-time payment of five shillings (i.e., £0.25) per subscribed share as reimbursement for the initial expenses of founding the society.Massachusetts Insurance Reports, page 42. According to the transcript of the company's annual meeting in 1843, the reimbursement to Murray was paid in 1842. See and note its reference to the "extinction of the expenses incurred in the formation of the Society".
Investors received annual interest payments equal to 5% of their actual paid-in capital. They also received one-third of the company's net profits, allocated amongst the individual investors according to the number of shares held. At the shareholders meeting in May 1841, the investors voted to cancel 25,000 unsubscribed shares and to double the nominal value of each share to £20. Doing so left the intended level of paid-in capital at £500,000 but effectively doubled each investor's share of the company profits. The first distribution of profits took place in 1843 and proceeded annually thereafter.A transcript of the 1841 meeting appears at . The shareholders did not actually vote to cancel the 25,000 shares. Instead, each investor was required to make an individual decision to accept the conversion of their shares, and to indicate that acceptance in writing. The fact that virtually all of the investors did accept the conversion was reported at the 1842 shareholders meeting, the transcript of which appears at The dates for the distribution of profit are reported in the 1842 transcript.
1838–1850
At the outset, the National Loan established offices in the larger cities of England, as well as in Ireland and Scotland (see the pictured 1840 advertisement). The advertisement appears on pages 8–9 of the advertising section. By the mid 1840s, operations had also been extended into the United StatesData appearing on page 847 of Volume III of the New York Insurance Reports indicates that policies began to be issued in the United States in 1844. By the next year, agencies had been established at least as far west as Cleveland, as evidenced by an advertisement placed in the Cleveland Herald on July 3, 1845. For an abstract of that advertisement, see Note that the table in the New York Insurance Reports shows the existence of an American policy that had been issued in 1840, but this likely was a policy issued elsewhere to an insured who later relocated to the United States. There is no evidence of any American agencies having been established prior to 1844. and into both the English- and French-speaking parts of Canada.A branch office had been established in Nova Scotia as early as 1840 (for which see the Halifax Brochure). As for French-speaking Canada, see the advertisement in which identifies an agent there as the manager of its "Canada Branch". By the end of the decade, it had also established an office in France. The office was located in Paris.
The company targeted the working-class market, which its officers variously described as the "industrious classes" or as people with "means more limited or uncertain than those more favoured by fortune".The quoted terms are from company officers at the first shareholders meeting in May 1840, as recounted in the transcript published as . The company's growth in this market was helped by its well-advertised willingness to accept premium payments on a monthly basis. But the cornerstone of their marketing was the feature that gave rise to having the phrase "Loan Fund" in the company name—policyholders were eligible for taking out loans from the company, in amounts up to two-thirds of their paid premiums. Allowing what are now called "policy loans" was essentially unknown in both England and the United States, and did not become commonplace in the latter country until the late 1840s.Marketing Life Insurance, page 318.
The National Loan also sold a deferred annuity product, which operated as a savings vehicle for persons willing to make regular payments to the company (and these payments could be made as frequently as weekly). At a pre-specified age, typically between 50 and 65, the policy would convert into an annuity that made regular payments back to the policyholder for the remainder of the policyholder's life. Here too loans could be taken out in amounts up to two-thirds of the premiums already paid. In addition, the unborrowed portion of the "two-thirds of paid premiums" was payable as a death benefit in the event the policyholder died prior to reaching the annuity-commencement age. This product was such a major element of the company's marketing strategy that its advertisements during the 1840s typically added the words "and Deferred Annuity" after "Assurance" to the company's name (although its legal name was never changed to reflect this).The basic operation of the deferred annuity product was set forth in most of the advertisements from this period. A detailed description of it appeared in the company's brochures. See in particular the description starting on page 11 of the Halifax Brochure issued in 1840.
1850s