How two 18th century Scottish drinking buddies gave your family 21st century peace of mind.
As everyone knows, the Scots have a wonderfully unique heritage. They are beloved for many things: kilts, bagpipes, Robbie Burns and haggis. Well, to be fair, maybe not haggis. But what you may not know is that the Scots are also the creators of the modern life insurance business. And true to the Scots’ quirky ways, that business was born out of the close friendship of two math geeks who were drinking buddies and church ministers with a concern for widows and orphans.
The story begins way back in 1560, when the Church of Scotland was reformed to allow its ministers to marry. Suddenly, the church was responsible for the fate of ministers’ families, who could be left destitute on the death of the family breadwinner. That was a problem for an institution that promoted faith, hope and charity. “Bad optics” we might say today.
So, in 1672, the Scottish Parliament passed the Law of Ann, which required church parishes to offer the families of deceased ministers a one-time payout to ease the situation – what we might call “good politics.” But that became a dilemma over time because the payments were often insufficient to meet the family’s needs, and individual parishes were going broke making payouts they could not predict. By the mid-1700s, this had become a seemingly unsolvable 200-year-old problem. Then serendipity intervened and the modern life insurance business was born. The breakthrough arrived in the form of two unlikely church ministers.
Robert Wallace and Alexander Webster were drinking buddies. In fact, they were famous for their habit. Wallace was the founder of the local debating club, where “debating” was understood to mean “drinking.” In addition to enjoying copious amounts of alcohol together, Wallace and Webster were also nuts about math. It was to these two gentlemen, both of strong Christian character, that the Church of Scotland turned to solve the problem of the “Scottish widows.”
Together, over drinks and with pencils and napkins at the ready, Webster and Wallace worked out a scheme for a perpetual fund that would never go broke. The hard math of the issue was to design a plan in which all ministers of the church would pay a regular premium into a fund. This would not only allow for sufficient payouts to their families upon their passing, but would also not bankrupt the fund over time. To create the plan, they assembled data from various sources on the life expectancy of Scottish ministers, as well as data on payouts and investments.
From this work the first “life tables” were drawn up. Using their considerable math skills, the two applied statistical methods. The result became the world’s first life insurance fund, the Scottish Ministers’ Widows’ Fund. It was the first fund in history to which proper mathematical models had been successfully applied. And it worked!
Today, Wallace and Webster’s work lives on in the large and accurate life tables – now called actuary tables – used by insurance firms around the world. Those tables and the brilliant math applied to them form the basis of the trust and accuracy life insurance companies enjoy. Life insurance joined kilts, bagpipes, Robbie Burns and yes, even haggis as part of the great story of Scottish heritage.
Here in the 21st century, when you purchase life insurance for the future security of your loved ones, you are placing your confidence in the dedication and genius Webster and Wallace applied so long ago. Tried, tested and true, life insurance remains one of the few consumer purchases you can make with such a high degree of confidence. All thanks to two Scottish drinking buddies with a love of math.