Legends of the Insurance Industry

In “Sapiens: A Brief History of Humankind,” Yuval Noah Harari compares businesspeople to powerful sorcerers and corporations to mythical figments of our collective imagination. He categorizes the limited liability company into the genre of legal fiction and opinionates that it is one of humanity’s most ingenious inventions.

Perhaps, then, one of the most influential business sorcerers of the 19th century was the mathematician and management thinker Charles Babbage. His ideas inspired a new spellbook for corporations and led them towards a new level of legal abracadabra.

The meteoric rise of the life insurance industry

Babbage's book, The Assurance of Lives (1826), proposed a new set of life tables that changed the world threefold: First, it gave 19th-century spiritualism a backbone by stripping death of its individual and qualitative aspects. Second, it made death predictable according to the actuarial laws of probability. Third, it revolutionized the life insurance industry.

One of the first American companies to assign a cash value to human life was The New York Life Insurance Company (NYLIC) in the 1840s. Today, the company is in the Fortune 100. Their very deep pockets enabled them to influence the highest echelons of government. Morton Keller explains in his book “The Life Insurance Enterprise, 1885-1910,” that they might have come to control every aspect of American economic life, had they not been accidentally caught, that is.

Revelation: “Government of the corporations”

The New York investigation of insurance practices in 1905, led by Charles Evans Hughes, discovered that NYLIC had made large financial contributions to different presidential campaigns: without the authority of law. At that time, the gifts of the NYLIC to Republican Campaign purposes amounted to roughly $150,000 (this is a relative project worth of $150million, today.)

In the same year, The New York Times commented, “it is, of course, no part of the business of life insurance companies to take a hand in politics or to attempt by any means whatever to sway the decisions of the electorate…So long as great corporations are permitted to send their checks for $50.000 to campaign committee Treasurers we shall have, or shall be in great danger of having a Government of the corporations, not a Government of the people.”

But it is, of course, the business of insurance companies to take a hand in politics. Indeed, assigning a cash value to human life is political. Babbage’s sorcery governed society’s collective imagination; since their inception, the life insurance industry simply learned to economize the innovation. To lobby on how the cash value of life should be taxed is merely the tip of the iceberg.

Triumph and Tragedy

The campaign funding scandal shook the conscience of America. The government introduced The Tillman Act (1907) to prohibit monetary contributions by corporations to federal candidates. More laws would follow in the future (for example, The Federal Election Campaign Act, 1971)

But in 2010, the tables turned. The Supreme Court ruling on Citizens United v. Federal Election Commission marked a decisive victory for corporations. The Court declared that limiting corporations’ independent expenditures on election speech was unconstitutional. In doing so, they announced that corporations had First Amendment rights.

Indeed, it seems the life insurance companies had been right all along. Corporations are part of the polity. Since their magical inception, their likes have evolved to become more than just a harmless flight of fancy. They are real and rational. Once a mere innovation in life tables, they can now frighten the most powerful democracy in the world into tribute.

Resources:

Sapiens: A Brief History of Humankind, by Yuval Noah Harari, Vintage, €9.29, 512 pages

The Assurance of Lives, by Charles Babbage, Nabu Press, €20.17, 204 pages

The Life Insurance Enterprise, 1885-1910, by Morton Keller, Harvard University Press, €48.00, 360 pages

The Decline and Rise of Democracy, by David Stasavage, Princeton Univers. Press, €35,97, 406 pages

New York Times, THE CAMPAIGN FUND SCANDAL. September 17, 1905

Citizens United Explained, by Tim Lau

Citizens United v. FEC, by the Federal Election Commission of the United States

Citizens United and Corporate Speech, David Moss and Marc Campasano

The MeasuringWorth Foundation: How much is a dollar from the past worth today?