Actuarial Issues in Insurance on Slaves in the United States South

Abstract

In 2000 several activist groups raised the possibility of suing for reparations from life insurance companies that profited from the business of slavery, and a prominent figure in this campaign is attorney Deadria Farmer-Paellmann. (1) Targeted were companies that had a long history of writing life insurance policies on slaves, and legal actions have begun to move forward. (2) Aetna of Hartford became a target based on fragmentary evidence of slave life insurance policies written by the company's agents. It is well known that York Life insured slaves. William Clendenin in The Bible of Life Insurance, published in 1932, noted that New York Life insured slaves, beginning in May, 1845--and that of its first 1,000 policies over one-third were on the lives of [slaves]. In fact, this company's first death claim was under a slave policy. (3) SB 2199 passed by the California legislature in 2000 required that all firms selling life insurance in that state provide copies of all archived material related to slave Three companies--Aetna, American International Group (AIG), and York Life--provided detailed information on individual policies. The photocopied records have been made available to the public at several locations in California, and they allow us to examine in this essay certain actuarial issues. (4) The records supplied by these three companies cannot be certified as a random or representative sample. If these data are indeed representative, they would imply that insurers made a very thin profit or perhaps even lost money on slave These data provide no evidence that the insurers made large profits on slave The failure to make large profits in no way mitigates the ethical lapse in becoming involved in the practice in the first place. The ethical issues present difficulties well beyond the scope of this special report. The likelihood of lawsuits related to reparations is high, and it is important for us to state two disclaimers. First, neither of the authors is involved in the legal actions, and neither has been consulted to date by any of the parties involved. Second, the mother of one of the authors (Gary Simon) was a refugee from Nazi Germany, and she received post-war reparations. It is impossible to determine now the amount of those reparations, but the figure is likely to be between $2,000 and $10,000. THE HISTORY OF LIFE INSURANCE Life insurance is today a common financial product, but it was not widely used until relatively late in history. The Romans had a sufficiently stable society that Ulpian was able to construct a rudimentary life table in about 200 A.D., although there is some uncertainty as to its exact uses. (5) We have no new evidence of life insurance until the late Middle Ages. The oldest life insurance contract for which we have evidence was issued in 1583. The English astronomer Edmund Halley went to Silesia to study the church records that allowed him in 1693 to prepare the first modern life table. (6) Halley is, of course, far better known for the comet that bears his name. Various European royal edicts from 1570 to 1681 banned the selling of life insurance as commercializing a transaction that was thought to be the proper concern only of God. (7) The legitimizing of life insurance took place first in the British Isles, through the Church of Scotland's annuity plan for widows of deceased clergymen. (8) Similar plans emerged among the Presby terian and Episcopal clergy in Philadelphia and York in around 1750. (9) Life insurance was also a part of the slave trade, although the policies would more properly be described as insurance. We make this distinction between life and property insurance for enslaved individuals because: (1) the beneficiary upon the death of the slave was never the slave's family; (2) the face amount of the policy was directly linked to the market value of the slave; (3) the term of the policy was short, nearly always one year or less. …