The Evolution of Actuarial Science to 1848

Abstract There were three phases in the evolution of actuarial science in England, culminating in the formation of the Institute of Actuaries in 1848. During the first phase, up to the middle of the eighteenth century, some companies offered life insurance and life annuities. At this time mathematicians were involved in life contingent contracts related to property. It was property valuation that originally inspired the early mathematical development of actuarial science in Britain and Ireland. A general shift to proper actuarial pricing in the insurance and annuity industry did not begin to happen until a crisis occurred in 1771. This was the second phase. Between 1771 and the end of the century, Richard Price and his nephew, William Morgan, laid the mathematical foundations for the sound operation of a life insurance company. The third phase began near the end of the eighteenth century when, with a burgeoning middle class, the demand for life insurance and life annuities soared. The number of life insurance companies grew enormously without being subjected to reasonable regulation and a large fraction of them failed. By the middle of the nineteenth century, a group of mathematicians working as actuaries saw the need for those working in the industry to have proper training and to have the opportunity to exchange ideas and information on a regular basis. In response, the Institute of Actuaries was founded in 1848.