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Insurance

What I saw at [the Royal Exchange] was a sale at auction of several old policies on very aged men to speculators ... to be kept up by them by their paying annual premiums to the company till the decease. This was done, I was told, because the companies had made it a rule "never to buy their own policies". A poor rule, it seemed to me! I had seen slave auctions at home. I could hardly see more justice in this British system. ... This, then, was what had disgusted the sweetest songwriter in England with life insurance!

— Elizur Wright (italics in original)

According to Wright himself, his interest in insurance reform arose from an unusual set of circumstances. In 1844, he had been given the job of travelling to England as the representative of a bookseller (Wright later described his job as that of a "peddler"). For reasons lost to history, Wright also had a commission from the Massachusetts Hospital Life Insurance Company to "procure information" on life insurance. The extent of this commission is also lost to history and, in particular, it is not clear whether it extended to anything more than simply bringing insurance-related texts back to Boston. But Wright was provided with a letter of introduction to English actuary Joshua Milne, noted at that time as the developer of a widely-used actuarial life table (the so-called "Carlisle table"). Although Wright considered his meeting with Milne very educational, it was not the one that sparked his interest in insurance. The crucial meeting came a few days later, when Wright's bookseller connection got him an invitation to a social event attended by English literary luminaries, including songwriter Barry Cornwall. While in conversation with Wright, Cornwall expressed his opinion that insurance was "the biggest humbug in Christendom" and that Wright could see this for himself by attending the 'policy auctions' that were held each week at London's Royal Exchange.

The policies being auctioned were whole life policies, meaning that they provided life-insurance coverage for the entire life of the insured and were paid for by annual premiums that remained level throughout the course of that life. Under actuarial theory, the premiums can remain level throughout life, despite the ever-increasing probability of death, only because they are calculated to be larger than needed for the initial years of coverage. During this initial period, the excess of the amounts paid over what the insurer actually needs is held "in reserve" to be used to fund the ever-increasing shortfalls that will arise in later years. Under the business practices of the day, the insured had no legal claim to any portion of those "reserved" funds. If an insured lived long enough to not need the insurance, or if the insured (of any age) found himself unable to continue paying the premiums, there was no contractual alternative to simply "forfeiting" the policy, at which point the reserved funds became an element of profit to the insurer. There was, however, a marketplace alternative. One day each week, speculators would convene at the Royal Exchange and bid for the right to purchase the policies of any insureds who cared to dispose of them. In exchange for a price that was decided by auction, the insured would sign the policy over to the highest-bidding speculator. That speculator then had the obligation to make the annual premiums, but also had the right to receive the death benefits that would eventually be paid by the insurance company.

Wright strongly disapproved of what he saw. "If I should ever become old myself", he later wrote, "I should not like to have a policy on my life in the hands of any man with the slightest pecuniary motive to wish me dead". He also found the spectacle of old men standing before speculators reminiscent of the slave auctions he had seen a few years earlier in Washington. The total effect, Wright later recalled, was to cause him to work to see that nothing similar would ever be done in the United States.

The only reason we know that Wright witnessed the London policy auctions in 1844 is because he wrote about it towards the end of his life, some forty years later. Although no biographer or historian has questioned his account, the fact remains that we have only Wright's recollection that this was the inspiration for his career in insurance. Some authors have advanced the notion that Wright's interest in insurance pre-dated his trip to England. This question is discussed in more detail below, in the "Historiography" section.

Early insurance work

A policy will generally be made void by a suicide, according to the finding of a coroner's jury; but not by a suicidal neglect of the means of preserving health, or indulgence in alcoholic poisons.

— excerpt from the brochure for Total Abstinence Life Insurance

Wright's earliest documented foray into the sphere of insurance took place in 1845, shortly after his return from England. Assuming that people who drank alcohol had higher mortality rates than those who did not, Wright concluded that the premiums paid by abstainers should be lower than those paid by non-abstainers. With this in mind, he approached his friend Willard Phillips at the New England Mutual Life Insurance Company with a proposal. Because all of the policies issued by the New England Mutual were eligible for dividends, Wright proposed that the abstainers be segregated into a separate class that would receive its own specially-calculated dividends. If Wright's assumption regarding mortality rates was correct, the abstainers would receive dividends at a higher rate than would be received by the non-abstainers, resulting in a lower net cost of insurance for the abstainers. Wright proposed the name "Total Abstinence Life Insurance" and was prepared to offer it to anyone who agreed to a contractual clause that would void the policy if the insured failed in his pledge to never "at any time, use any intoxicating liquor as a beverage". The New England Mutual agreed to this arrangement, but to no avail. The number of policyholders (including potential policyholders) who were willing to make the pledge was too small to justify setting the project in motion.

At some point after he ceased publishing the Chronotype in 1850 (the historical record is not clear on how long after), Wright succeeded in getting six insurance companies to fund a limited-edition book of actuarial values. Called Valuation Tables, the figures in the book would enable an insurer to easily estimate its actuarial liability for policies already in force. It was completed in 1853, at which point Wright provided the subscribing companies with their copies. He kept several additional copies for sale to others, which was permitted under his agreement with the subscribing companies so long as the other purchasers paid at least as much as they did. Looking to the very large number of calculations required to produce the Tables, Wright biographer Lawrence Goodheart described it as "one of the most prodigious feats in actuarial history".

While the Tables were being prepared, Wright published an article in the ___ 1852 issue of Hunt's Merchants' Magazine. Titled "The Regulation of Life Insurance", it discussed the perils of operating an insurance company without having an accurate estimate of the funds it would need to meet its obligations. It also exhorted state legislatures to require companies to produce these estimates on an annual basis.

ADD BOOK REVIEW.

LOBBYING FOR THE VALUATION LAW

Massachusetts insurance commissioner

1858 - Massachusetts law requires the Insurance Commissioner to calculate reserves on all policies of all licensed companies. (Moorhead, 19) England had attempted to impose a similar standard a few years earlier (in 1853), but failed due to strenuous opposition from the insurance companies. Shepherd notes that the Act was attributable to "Wright's persistence" and that it was "adopted as a reaction to the abuse of the gross premium method of valuation used by some companies and defended even in an absurd form by some distinguished insurance authorities".

See Sprague JIA 15, 411. (Moorhead, 20)

Wright's choice of the net level premium method for valuing policies was controversial. At the time, the other major valuation method was the gross premium method. Under either method, the value of the policy (i.e., the amount needed to be held "in reserve") is determined as the amount that will, in combination with future premiums and investment income, be sufficient to meet the company's liability for paying future claims. Under the gross premium method, the actuarial present value of future premiums is based on the amount actually charged for the policy. Under the net level premium method, a theoretical amount is used. That theoretical premium typically is lower (sometimes much lower) than the one actually charged under the policy, because it is intended to reflect only the payments for claims under the policy. The gross premium, on the other hand, is intended to cover not only the claims, but also the expenses (including profit margins) that will be incurred in the course of doing business. And in the case of so-called "participating" policies (which was the predominant type in Wright's day), the gross premium also includes an amount intended to serve as a stop-gap against an unexpectedly high level of claims. In the normal course of business, these additional amounts are returned to the policyholder in the form of dividends when (as is likely) they prove to have not been needed. In practice, the net level premium method and the gross premium method should produce equivalent results, provided the gross premium reserve is based not only on future policy claims, but also on reasonable estimates of future expenses and dividends. The controversy arose under Wright's plan because some proponents of the gross premium method did not think it necessary to anticipate those future expenses and dividends. As a result, those proponents held that a company's true need for reserved assets was much lower than the amount indicated by the net level premium method.

The International case

Main article: XInternational Life Assurance Society

Controversy over the choice of valuation method soon came to a head with the case of the XInternational Life Assurance Society, a British firm based in London that was doing business in Massachusetts (and other American states). Massachusetts law required companies to provide the insurance commission with details on all its in-force policies, and the International failed to do this. Even though the law did impose a financial penalty for that failure, Wright agreed to waive it if the International ceased issuing any new policies in Massachusetts until such time as it did provide the information. In his first Insurance Report to the Massachusetts legislature, dated January 1859, Wright noted the situation, but opined that the International's capital was "apparently ample". He did add, however, that proof of the International's good financial condition would not be possible until the information was submitted to his office and advised "those who contemplate getting their lives assured in this company ... would do well, in our opinion, to await the same proof".

Nonforfeiture values

Although Wright's first year in office was largely devoted to monitoring the solvency of insurance companies, he still took some time in his Annual Report to discuss the issue of forfeited policies (i.e., the same issue that led to the London policy auctions that Wright witnessed in 1844). In the report, Wright focused especially on the practice of reversionary dividends, under which a company paid dividends to its policyholders neither in cash nor as credits against current premiums, but as additional insurance. Wright noted two problems with this practice. First, the policyholder might not want (or need) the additional insurance. And second, the additional insurance was provided as an adjustment to the face amount of the original policy, and not as a separately issued policy. The difference, Wright observed, was that a subsequent forfeiture of the original policy would effectively result in a forfeiture of the dividend. There were four companies doing business in Massachusetts that engaged in this practice, and Wright identified them by name in his report.

In addition to focusing on the extreme case of reversionary dividends, Wright also reiterated his basic general concerns about policy forfeitures. He closed his discussion by recommending that the legislature pass a law granting policyholders a vested right in the theoretical reserve established under their policies, and followed up his recommendation with a specific proposal for such a law. That proposed law did not call for paying cash to a forfeiting policyholder. Instead, it called for treating the policy reserve as if it had been paid in cash, but then immediately returned to the insurance company as a premium on a fully-paid-up term insurance policy. Under the proposal, the term insurance policy would have the same death benefit as did the original (forfeited) policy, and coverage would extend for whatever length of time could be provided by that "premium".

The Massachusetts legislature did not pass Wright's proposed law. In his next Annual Report, he noted that one of the stated objections was the likelihood of disputes over the length of time for which insurance coverage would continue. Wright addressed that objection by modifying his proposal to state a specific actuarial basis for determining the length of the extended term of insurance. He went so far as to provide (in the Annual Report) a complete set of tables that could be used to determine the length of that term, along with some numerical illustrations on how to use the tables.

And still the legislature did not pass Wright's proposal, so he returned to the issue again in his 1861 report. At this point, the data collected by Wright's office was sufficient to study the extent and magnitude of policy forfeitures. The results were surprising—forfeitures played a much smaller role in the finances of American companies than they did for British companies. Whereas it was not unusual for a British company to fund an entire year's death claims with the amounts forfeited by other policyholders, this was not the case for companies doing business in Massachusetts. There, the amounts forfeited averaged less than 3% of total receipts, amounting to about 12% of death claims. In large part, this was because the American companies were much less severe in their treatment of delinquent policyholders, frequently allowing the policy to be reinstated if the insured was able to resume premium payments. Also, and unlike most British companies, the American companies often were willing to pay a surrender value to a policyholder even though they had no contractual obligation to do so. But despite the more benign situation in Massachusetts, Wright remained undeterred in his advocacy for a nonforfeiture law. After detailing the results of his study, Wright argued that the amount of forfeiture, although relatively small in magnitude for the industry as a whole, was still "large enough to be worthy of profound consideration". He made an analogy from mechanical engineering, saying that "it is often a slight filing and polishing which determines ... whether a well-proportioned and powerful machine shall work well ... , or run unprofitably and wear itself out".

Whether because of the mechanical-engineering analogy or otherwise, the legislature did pass a weakened version of Wright's proposal in May of 1861. Despite this, Wright returned to the question of policy forfeitures in his 1862 report (i.e., the first one after passage of the law). There were two issues that Wright addressed. The first was purely technical. The new law implicitly presumed that all policies were of the whole-life variety (i.e., scheduled to end at the death of the insured). But what of policies that had fixed maturity dates, such as endowment policies? For these, Wright discussed how the law should be applied in those cases where the paid-up term of insurance extended beyond the policy's fixed maturity date. The second issue was more substantive, and arose from the non-retroactive aspect of the law. Because the law applied only to newly-issued policies (i.e., it did not modify existing contracts), it effectively created two classes of policyholders—those who were subject to the pre-existing risk of forfeiture and those who were not. When calculating dividends to be shared with its policyholders, it would be unfair to share any gains from forfeitures with policyholders who were not themselves at risk of forfeiture. And so, a few companies offered prospective policyholders the choice of opting out of the law's protection, in exchange for being eligible to share in those forfeiture gains. Wright noted the practice and questioned its legality. He also identified, by name, the three companies who were engaged in it. But he did not take any action against them. Instead, he simply wrote that the matter would have to be decided by the courts.

Other activities as commissioner

MAJOR THEMES IN REPORTS

Wright's tenure as an insurance commissioner contained the period during which the American Civil War was fought, and he maintained his anti-slavery stance up through the end of the conflict. For the most part, his activities in this area was independent of his insurance work, but there were two instances where they were not. In one of the Annual Reports for 18__, Wright was describing the assets held by ______. These assets included ownership of undeveloped land in _____________. But it happened to have been land on which abolitionist John Brown was buried. Wright described the parcel as GET QUOTE. DISCUSS FUROR. FOOTNOTE WILL SAY THAT THIS IS NOT IN THE LIFE REPORTS THAT WERE REPUBLISHED IN 1865.

Salmon P. Chase was an acquaintance of Wright's from their anti-slavery activities. Shortly after Chase became Secretary of the Treasury under the new Lincoln administration, Wright began sending him letters offering advice on how to address the slavery issue. Once the war had begun, this advice extended to a call for ______. Most of these letters were written by Wright as an individual, not as an insurance commissioner. But one letter from December 1861 was written as from the "Office of Insurance Commissioners". In that letter, Wright offered his services in Washington, saying "_________________". The offer was not accepted.

Ouster from office

Every man whose life has been mixed up, as mine has been, with public and private controversies, must have enemies, and much prejudice stored somewhere against him of which they can take advantage. I don't complain of this. ... Could I live on a hill if there were no valleys? "Ah! But you are a rogue yourself, Wright!" Come on, mistaken friend. That is good, I like it. The sixty odd years of my life have developed many animosities towards me just like yours, and I will reveal some of the causes.

— excerpt from page 14 of Wright's A Curiosity of Law.

In May 1866, the Massachusetts legislature abolished the board of insurance commissioners. In its place, a single commissioner would be given all the responsibilities of the old board and, as was also true for the older board, would hold office by appointment from the state's governor. Newly-elected Governor Alexander Bullock declined Wright's request to be appointed; nor did Bullock appoint George Sargent, Wright's fellow commissioner on the old board. Wright's and Sargent's terms ended as of July 1, 1866.

The historical record is unclear as to why all of this took place. The 1937 biography of Wright says simply that there was "political pull" from unnamed "officers of some companies". The only biographer to go into any detail on the episode is Goodheart, and he relies largely on Wright's own account. That account, titled A Curiosity of Law, was self-published by Wright in 1866. In it, he links the political actions against him to a situation that had arisen some four years earlier when, in 1862, the Eagle Fire Insurance Company was placed under receivership by a Massachusetts court. One of the two court-appointed receivers was Joshua Webster, the company's president (the other was an attorney who later was elected to the Massachusetts legislature). The court required Wright's review of the receivers' statement of accounts and, upon doing that review, Wright found several financial improprieties. After communicating these to the court, Webster and the other receiver were removed from their positions, thus causing them to forfeit the $5,000 they were claiming for their services. In his telling of the story, Wright found it notable that the legislative actions in May 1866 were initiated by an inquiry into his own financial dealings, and that this inquiry was requested by the representative of the district in which Webster lived.

Whether or not Wright was correct in tracing the opposition to Webster, it is clear that political maneuvering against him did start in April 1866. This is when the state legislature opened an inquiry into the insurance commissioners, ordering its Committee on Salaries of State Officers to look at the question of whether the commissioners were abusing their office for financial gain. The inquiry was two-fold, the first aspect being the amounts paid under a certain provision of the same 1858 act that led to Wright becoming a commissioner. Under that provision, all insurance companies doing business in Massachusetts were assessed a tax that was intended to cover the costs of performing their annual solvency valuations. Even though it was acceptable for the insurance commissioners to receive these funds as reimbursements for the costs of the valuations, a $1,000 cap was imposed during some of the earlier years (with the excess amounts being kept by the state). In 1862, the legislature removed the $1,000 cap, and did so on a retroactive basis. But the issue giving rise to the inquiry was the amounts paid after the retroactive grant. The state treasurer understood the 1862 decision to have removed the $1,000 cap for all years, including future ones, and accordingly paid Wright the full amount collected from the insurance companies (which by 1866 had risen to more than $5,000 per year). One fact that came out of this aspect of the inquiry was that Wright had been using these additional funds to pay salaries to five family members. The particular family members were not identified by name, but presumably included the two children (son Walter and daughter Lucy) who later became insurance-company actuaries.

The second aspect of the inquiry was the allegation that Wright had been receiving payment for consulting work from companies that were doing business in Massachusetts. Wright did not deny this. Indeed, he acknowledged that he had received approximately $5,000 in such income in 1865. But he argued that, so long as he was not working against the interest of the state's citizens, such income should be of no concern to the legislature.

Within two weeks of being enjoined to conduct the inquiry, and about one month before it issued its report, the Committee on Salaries recommended that the legislature pass two bills that it (the Committee) had authored. One of them called for increasing the assessment against insurance companies ten-fold, but this bill did not become law. The other bill, which did become law, was the one that abolished the existing board of commissioners. It also called for increasing the salary of the sole commissioner to $2,000 per year (Wright's salary had been $1,500) and permitted the commissioner to pay clerical salaries of $1,000 per year. The provision for the clerical salary was to be in lieu of receiving any portion of the insurance company assessments, which would now be kept in their entirety by the state.

The Committee on Salaries issued its report in May 1866. Regarding the payment of the insurance assessments through to Wright, the Committee reported that it "could find no ... authority by which said money could be drawn" (referring to the annual assessments in excess of $1,000). But it did not recommend prosecution or other civil action against either Wright or the state treasurer. Regarding Wright's acceptance of consulting fees from companies doing business in Massachusetts, the Committee opined that state officials "should not be tempted to grant [licenses] by the payment of money". Nonetheless, it found no violation of law and, instead, proposed a law that would prohibit the practice in the future. That proposal was not enacted.

The Act that reorganized the Board of Insurance Commissioners set its effective date as "July next". Because the Act was passed in 1866, some authors have interpreted this to mean that Wright remained in office until July 1, 1867. He did not. His replacement as of July 1866 was reported in the insurance press of the day.

Later insurance work

The acknowledged skill and ability of Mr. Wright in Life Insurance is a sufficient guarantee that this Company can offer superior inducements to persons desiring insurance.

— excerpt from an 1869 advertisement by the Widow and Orphan Fund Life Insurance Company of Nashville, Tennesee

After departing his position as a Massachusetts insurance commissioner, Wright continued to work as a consultant to several life insurance companies. By 1869, the Insurance Gazette carried advertisements from four companies that listed him as their actuary. One of them went so far as to point out their association with Wright in the prose portion of the advertisement (see quote to the right). He also became a frequent contributor to the insurance magazines and journals that were then coming into being. At first, most of Wright's contributions appeared in Stephen English's Insurance Times, founded in 1868 and published in New York. But over the years, he was published in other journals, as well. Wright also authored several pamphlets and short books on insurance.

With these various works, Wright remained in the public eye and maintained his stature as one of the leading authorities in the insurance industry. As such, Wright frequently commented on the major insurance issues of the day, including tontine life insurance and assessment insurance, as well as taking part in the premium-reduction controversy of 1872. But most of Wright's insurance efforts went into two projects—revising the Massachusetts nonforfeiture law and establishing a new type of insurance company.

Revisiting the nonforfeiture law

Starting in ___, Wright made public statements about problems with the nonforfeiture law that he himself had authored. His concern was not with the adjustments that were made to his proposal when it was enacted in 1861. Instead, Wright now renounced the very philosophy that underlay the law's provisions. That philosophy called for treating the policy reserve as if it had been paid in cash to the surrendering policyholder, only to be immediately returned to the insurer as a premium on a fully-paid up policy. When calculating the amount of insurance that could be purchased with that "premium", the law allowed the insurer to treat 20% of the reserve as a loading for expenses (and, thus, the actual amount applied to the "purchase" of paid-up insurance was only 80% of the policy reserve). A consequence of this treatment is that, because the policy reserve under a whole life policy increases over time, so did the "surrender charge" (i.e., the 20% of the policy reserve). Wright called this a "blunder" on his part GET EXACT QUITE and sought to correct it. He also sought to amend the law so as to require the insurer to offer the policyholder the option of receiving the nonforfeiture value in cash, instead of paid-up insurance. This latter provision was consistent with another of Wright's _____-- that a man did not need insurance beyond a certain age. Wright had expressed a preference for policies that matured at a specific age such as 70 or 75 (meaning that the face amount of the policy would be paid to the policyholder in the event of survived to that age) because at point, reasoned Wright, the need to insure his dependents had disappeared and the policyholder now faced the need to provide for his own sustenance. By adding a cash option to a revised nonforfeiture law, Wright was looking to allow all policyholders to access these funds even if the policy itself was not of the "endowment" type.

[1871 attempt

[Actual passage of the law. WHEN?

OTHER

Letters from EW to McClintock (Moorhead, 17)

1869 - W.C. Wright markets the arithmeter at $600. At most, only 16 were made. WCW observed that "Tate's Arithmometer" (a mechanical desk calculator not invented till later) was more efficient and less expensive. (Moorhead, 333-334) The Arithmeter - a circular slide rule. McClintock said (in the Insurance Times in 1872) he was "bearing witness to the extreme practical usefulness". Another description is by G. Knight (1930), quoted by Moorhead at page 333. Four still exist. (Moorhead, 333-334)

1871- An expanded version of Valuation Tables was published in 1871.

EW published a paper in JIA 16, 355 (Moorhead, 41)

Insurance organizations

Deserts are more comfortably crossed by caravans than by solitary pilgrims.

— excerpt from an 1859 letter by Wright to the editor of the Insurance Gazette

Shortly after becoming an insurance commissioner, Wright sent a letter to the editor of the Insurance Gazette, commenting on the possibility of an association of actuaries similar to the already-existing Institute of Actuaries in England. Nothing along these lines was done at that tine. But for a few years after leaving the Massachusetts insurance board in 1866, Wright was actively involved in the formation of three nascent insurance organizations—the Chamber of Life Insurance, the Actuarial Society of America, and the National Convention of Insurance Commissioners.

Chamber of Life Insurance

In 1866, several insurance executives proposed a national association of their companies. Wright encouraged such an association and published a letter in the Baltimore Underwriter stating that it would be good for the industry to speak with "common aim and common censorium". An organizational meeting was held in September of that year in Hartford, Connecticut. Wright spoke at the meeting and was appointed to the committee that drafted the association's Constitution. The group ultimately came to call itself the Chamber of Life Insurance in the United States, the name apparently in analogy to the various chambers of commerce that existed throughout the country. Because the Chamber was intended to be an association of companies, independent actuaries such as Wright did not qualify for membership under its by-laws. Nonetheless, he was elected the Chamber's first "Honorary Member", after being proposed for such by John Eadie, the same person who eight years earlier supported Wright in the International case (discussed above).

The Chamber set itself the task of promoting the interests of the industry as a whole. In its first few years, it explored the possibility of serving as a central valuation agency for companies, and Wright's name was put forward as one of the persons who might lead this effort. The plan never came to fruition, and neither did a plan to establish Federal jurisdiction over all companies that did business in more than one state (for which Wright drafted a bill that was submitted to Congress, but not enacted). The group soon lost momentum and its activities became sporadic.

The Chamber never established itself as a major force in the life insurance industry, despite being reorganized in 1873. At that point, Wright seems to have played no further role in the organization. It was finally dissolved in 1877, after losing financial support from its primary sponsor, the Mutual Life Insurance Company of New York (the company later known as Mutual of New York).

Actuarial Society of America

The first serious attempt to found an American organization similar to England's Institute of Actuaries occurred in 1867. In November of that year, nine prominent actuaries, including Wright, met in the board room of the Mutual Life Insurance Company of New York. The attendees agreed to an actuarial organization of some sort and appointed a five-man committee to draft appropriate resolutions, with Wright being one of the committee members. A second meeting was held the next month to hear its report. But rather than recommend any formal organization, the committee called for an informal club that would hold regular meetings for the discussion of actuarial topics.

The failure to establish a formal organization was noticed by the insurance press. An editorial in the Insurance Times opined that "it is not the great men in the actuarial profession who are indifferent or averse to the formation of so beneficial an institution as this would prove". Instead, the failure was blamed on "men painfully conscious that an institute of this character ... would diffuse so much light and learning ... as to belittle their too limited attainments". It is unclear who was being described here—insurance executives in general or certain individual actuaries. Some twenty years later, David Parks Fackler, an actuary who was involved in these meetings, stated that there was some concern about "persons with the title of Actuary ... who had few or no professional qualifications as such". He went on to say that "a society could not well be formed without them, but giving them full membership and possibly office in such a society, would be tantamount to dispensing with all requirements in the way of qualification". Fackler gave a similar account some twenty years after the first, adding his opinion that the actuaries of the day "preferred to have nothing at all" instead of a society that admitted faux actuaries. He also expanded on his first statement by identifying the three actuaries whom he considered to have been lacking in professional qualifications. Wright was one of them. Recalling Wright's analogy to crossing a desert (as quoted above), actuarial historian E.J. Moorhead notes that he "must have been distressed if he ever knew, or guessed, that he himself was later to be regarded as a reason for postponing ... building the caravan".

Twenty years after this initial attempt, and some three years after Wright's death, the Actuarial Society of America was founded in 1889. Wright's son Walter was one of its charter members and was on the committee that drafted its constitution. The Society lasted for some sixty years, until it was merged into the modern-day Society of Actuaries.

National Convention of Insurance Commissioners

1871 - Wright is speaker at the first meeting of the NCIC (later to be the NAIC). (Moorhead, 36)

Legacy

Historians generally acknowledge the central role played by Wright in developing the insurance industry in the United States. Actuarial historian E.J. Moorhead placed him on his list of the "Leading Actuaries of the Early Nineteenth Century", describing Wright as "immensely influential in establishing sound actuarial practices". Another actuarial historian, Robert B. Mitchell, focused on Wright's activity in consumer protection, calling him a "militant consumer advocate" and "the Ralph Nader of his day".

In mid 1865, while still a Massachusetts insurance commissioner, Wright arranged for the publication, in one volume, of the annual reports that he had submitted to the legislature since taking office. Titled Massachusetts Reports on Life Insurance: 1859-1865, its authorship was credited to "The Insurance Commissioners", but the reports themselves identified (by name) both Wright and fellow commissioner George W. Sargent. It also included a technical appendix that was specifically credited to Wright. According to its Introduction, publication was prompted by the unexpectedly high interest in the individual reports, an interest that ran high enough to sell out all existing copies of the individual reports. In 1932, the reports were re-published by the American Conservation Company under the title The Bible of Life Insurance.

Wright's technical appendix in the Massachusetts Insurance Reports contains the first known example of what is now called an accumulation formula. Wright had seen that calculating the theoretical reserves under a policy could be simplified if the calculations were done in what is now called a "recursive" fashion, wherein each entry in the valuation table is equal to the prior entry but modified to reflect certain actuarial adjustments. Wright also noted that some of those adjustments required the same sub-calculations for each entry and that, as a consequence, the overall work could be simplified further if those common sub-calculations were pre-tabulated. He called these pre-tabulated numbers the "coefficients of accumulation", hence the modern name for formulas of this type. In 1869, four years after Wright's publication, actuary Emory McClintock published his own variation of Wright's formula. McClintock's formula was algebraically equivalent to Wright's, but called for different pre-tabulated numbers. The next year, David Parks Fackler published another variation, more similar to Wright's then was McClintock's but also requiring a different set of pre-tabulations. Fackler's version eventually became the most widely-used of the three. But in both of the versions produced by McClintock and Fackler, one of the required pre-tabulations was identical to one of Wright's and they each used Wright's algebraic symbol for it. That symbol, u, was later adopted as part of the official actuarial notation used by the Actuarial Society of America, which defined it in precisely the same fashion as did Wright.

Wright's death in 1885 occasioned lengthy obituaries in the insurance press of the day. [EXAMPLES] His death was also noticed in England, where a brief obituary ran in the Journal of the Institute of Actuaries, describing him as "a prominent figure from life assurance circles [in America]".

In 1945, the American Risk and Insurance Association established an annual prize for books that addressed the topic of insurance. Originally called the Elizur Wright Memorial Award, it has continued to be awarded on an annual basis. It is now called the Kulp-Wright Book Award.

"one of the most spectacular personages of life insurance history" (Mitchell, 19) "exceptional actuary" "Actuarial practice ... has been materially influenced by [a man of] extraordinary character and ability" (Moorhead,9)

In 1871, EW wrote that NLP reserves were intended to assess solvency not at the present time, but "until every pending contract is settled". (Also see Shepard's paper in RAIA 1939 re: "early warning") (Moorhead, 19)

LEGACY Quote from Dawson about how the market would have created surrender values on its own (in the discussion of Moir paper in TASA 13). (Moorhead, 24)

Moorhead notes that, during the insolvency crisis of the 1870's (90 out of 130 companies), Massachusetts fared much better "partly because EW had required them to establish NLP reserves at least several years earlier than commissioners in other states did". (Moorhead, 34)

See Jackson's 1932 paper in TASA 33 (145) (Moorhead, 135) Dale Gustafson on Stat vs. GAAP cites Wright as the progenitor of statutory valuations (1971 Seminar on Adjusted Earnings). (Moorhead, 246)

Also see assessments by Robbins (TASA 24: 1923), Jackson/Shepard (RAIA 29: 1940) and the seminar in 1985 RSA. (Moorhead, 39)

Inventions

[Intro

[early patent. note that the earliest was by his father, not him

A few years before Wright became an insurance commissioner, he conceived a plan to establish an exhibition hall for inventors. Under his plan, inventors would rent floor space and show their products to the general public. Wright intended to call this the "Boston Hall of Arts" and managed to get some coverage in one of the leading commercial journals of the day. But the plan apparently never was put into practice—neither of Wright's major biographers (the Wrights and Goodheart) mention the plan at all.

[Arithmeter

Personal life

Wright had eighteen children, but outlived thirteen of them. Four of his children died within a year or so of their births; another five died while still children.

In the wake of Wright's ouster from office as an insurance commissioner, two of his children found employment as actuaries for insurance companies. Lucy Jane Wright (1842-1867) became the actuary of the Union Mutual Life Insurance Company, making her the first known woman actuary. She died of tuberculosis one year later and was eulogized in the June 1867 issue of the Insurance Monitor and Wall Street Review. Son Walter C. Wright became the actuary for _____

A great-grandson of Wright's also was an actuary. Walter Chapin (1902-1992), grandson of Wright's daughter Mary, is remembered as an innovator in life insurance, being the primary architect of adjustable life insurance, an insurance product that became popular in the United States in the 1970s.

Death on November 22, 1885.

Historiography

Biographies

Our subject is a domestic man ... . Few women can beat him at sweeping the floor, making the bed, or dressing a baby.

— page 106 of Bungay's Crayon Sketches.

The first substantive work about Wright appears to be a biographical sketch in George W. Bungay's 1852 Crayon Sketches and Off-hand Takings. Although it identifies Wright as a translator of La Fontaine's Fables and as the editor of the Commonwealth, it is otherwise devoid of any biographical details. Instead, the sketch devotes itself to describing Wright's personal aspects, such as his demeanor and his day-to-day life. Crayon Sketches appeared in subsequent revised editions (under slightly different titles), but Wright's sketch did not appear in any of these subsequent editions.

The first biography that incorporates historical detail appeared as an article-length obituary in the November 1885 issue of the Insurance Times. DISCUSS

[Cyclopedia. International Insurance Encyclopedia

[Cambridge Sketches

The world structure of life insurance as it stands today had as its founder, its reformer, its saviour, its conservator and its vindicator—an American genius—Elizur Wright! Surely if ever there lived a hero and a nobleman after God's own heart—that man was Elizur Wright.

— excerpt from the biographical sketch in The Bible of Life Insurance.

When the Massachusetts Insurance Reports were reprinted in 1932 as The Bible of Life Insurance, the reprint included a biographical sketch of Wright's life and works. In a contemporaneous review of the reprint, actuary James Elston remarked on the hagiographic style of the biography. Although Elston acknowledged Wright's accomplishments ("Wright did more for the advancement of life insurance in this country than nearly any other man"), he felt that the "eulogy" would have been more impressive had its language been more conservative. In making this point, Elston included an extended quote from the text, a portion of which appears in the nearby box.

One of Wright's daughters (Ellen) had collected various papers and documents relating to her father's life and intended to use them as the basis of a biography. She had already published (in 1893) a book detailing her father's advocacy for the Middlesex Fells, but died before proceeding very far with the general biography. The project was taken over by her son Philip (Wright's grandson). He too died before the biography was published, but his work was mostly finished and was brought to completion by Philip's wife Elizabeth. Published in 1937 by the University of Chicago Press, Elizur Wright: The Father of Life Insurance became the primary source of information about Wright's life for most of the 20th century.

A biographical sketch of Wright was published in The Journal of Insurance in 1959. The article, "Elizur Wright: The Man and His Work", was largely a synopsis of the Wrights' 1937 biography, expanded by technical material drawn from the Massachusetts Insurance Reports.

[History of ___ company

[Abolitionaist, Actuary, Atheist

Contradictory accounts

One historian of early American life insurance opined that Wright became intrigued with insurance mathematics while studying at _______. COMMENT And one of Wright's biographers stated that Wright looked into insurance mathematics at the request of the _____ of a Boston life insurance company (but not the one that had given Wright the commission to "procure information" in England). The biographer's source for the statement is unclear and the text provides no explanation as to why the company would have made such a request, given that Wright had made no prior name for himself in life insurance. In all, the historical record offers no clear evidence as to why Wright became interested in insurance.

Arithmeter Although this task had been considered too difficult for even a single company, EW did it for all companies using his arithmeter, plus help from his children. (Moorhead, 19)

Bibliography

Works by Wright

• Wright, Elizur; Sargent, George (1865). Massachusetts Reports on Life Insurance: 1859-1865. Boston: Wright & Potter. (herein, the Massachusetts Insurance Reports).
• Wright, Elizur (1866). A Curiosity of Law: or, A Respondent in the Supreme Judicial Court as a Judge in the General Court; and What Possibly Came of It. Boston: self-published.

Works about Wright

• Bungay, George W. (1852). Crayon Sketches and Off-hand Takings. n.p. LCCN 04035451. (The chapter about Wright appears at pages 106-108.)
• Wright, Philip Green; Wright, Elizabeth Q. (1937). Elizur Wright: The Father of Life Insurance. University of Chicago Press. LCCN 37002253. (herein, Father of Life Insurance)
• Goodheart, Lawrence B. (1990). Abolitionist, Actuary, Atheist: Elizur Wright and the Reform Impulse. Kent (Ohio): Kent State University Press. ISBN 0-87338-397-4.

General

• Barnes, William (1899). New York Insurance Reports: Volume III (Years 1864-1870). Albany: Insurance Department of the State of New York. (herein, the New York Insurance Reports)
• Singer, Isidore, ed. (1910). The International Insurance Encyclopedia. New York: American Encyclopedic Library Association.
• Moorhead, E.J. (1989). Our Yesterdays: The History of the Actuarial Profession in North America, 1809-1979. Schaumberg, Illinois: Society of Actuaries. ISBN 0-938959-08-5.

External links

• Bungay's Crayon Sketches