For us who work in this industry, the provision of insurance is an inherently moral act. However, when discussing issues of insurance and morality—which I am defining as the principles that govern and concern distinctions between what is right and what is wrong—the landscape can be quite broad, and the issues many.
Life insurance, at its core, is a product that provides a financial benefit to the dependents of a buyer in the event of untimely death. Insurers price and sell contracts based on assumptions made about the policyholder’s health and potential lifespan. Does that mean life insurance has characteristics that might make it seem like a game of chance? I would say no, as everyone dies, and protecting loved ones is a responsible act. Yet, some insurance products do have features that could be viewed as such. In Brazil, for example, one of the most successful life insurance products, Capitalização, has a feature where the contingency of the probability of mortality is wholly replaced with the probability of the “government lottery weekly draw.”
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To me, Harari’s theory of how and why humans today are Earth’s dominant life form and how this came about was quite provocative. His theory hinges on the changes to human thought of the Cognitive Revolution, a name given to a developmental shift that occurred approximately 70,000 to 30,000 years ago. This spontaneous evolution gained for humans a cognitive expansion into the capability of abstract and conceptual communication, which changed to a remarkable extent how humans relate with one another and view the world.
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How might this relate to morality and insurance? Stay with me. The Cognitive Revolution, writes Harari, opened the door not just to more complex social structures, but to more complex conceptual structures as well. In its early years, stories, myths and legends were born, which lay the groundwork for the formation of religious belief systems. These belief systems as they evolved came to govern the morality of adherents and also incorporated the concept of monogamy, which over time consolidated the family as the central social unit.
All of this made me wonder if the development of human religious thought may have prompted more than just the monogamous family unit and the morality that came to govern human life. Could these developments, along with the generally short life expectancies of ancient times, also have prompted the concept of protecting members of families bound together by holy wedlock from various risks that could result in death of a family’s head? Could all of these new conceptual frameworks have sparked the “eureka” that led to the development of the product we now know as life insurance? It’s an interesting idea to consider.
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The views expressed in this article are solely those of the author and do not reflect the views of either his employer or the Society of Actuaries.
Posted with permission of the ©Society of Actuaries, Schaumburg, Illinois.
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