A history of life as we know it

At one time Scotland had nine long-established life assurance offices but they have been picked off one by one in a constantly changing financial services sector and now only one - the mighty Standard Life - can claim to be truly independent, although there has been one attempt at ridding it of its mutual status and there is always the threat of another.

But the names of most of them live on in one way or another and that figure of nine is testimony to the part the life offices played in the growth of financial services in Scotland.

The people behind the establishment of Scotland’s life offices showed the same business acumen and perspicacity as those in Scotland who were to the fore in the development of banking, investment trusts and fund management.

It is true that many of them were driven by the belief in thrift, investment and the astute husbandry of money as well as having the ability to spot and take advantage of a good business opportunity. But sometimes there were other motivations and other forces at work.

In 1883 a young man called Adam Keir Rodger launched a new insurance company, the Scottish Temperance Assurance Society Limited. He was only 27, a brewer’s son with no head for business.

But according to the company’s official history he was a man with boundless energy, a canny head and a blazing conviction that temperance was not only healthy but good for business as well.

One of the provisional directors, George Macfarlane, the biscuit manufacturer, who was president of the Glasgow United Young Men’s Christian Association, said: "The object in establishing the company was not so much to make money as to prove to the community that temperance lives were really better than the lives of those who were not abstainers."

So the Scottish Temperance was launched in Glasgow, with special terms for total abstainers. The official history says that many actuaries thought it would not work and, indeed, in its first year the company was faced with disaster when policy holder No1 died. He had been insured for 1,000 and the company had only 915 in the kitty.

The company survived and its rapid expansion throughout the United Kingdom led to David Lloyd George, the future Prime Minister, taking out a temperance policy in 1910. But he waived the abstainer’s discount the following year when he took to drink, claiming it was on doctor’s orders.

After the First World War attitudes to drinking had become more tolerant and the directors wanted to make the company legally mutual. A name change was required and the new name was obvious: Scottish Mutual, and it was eventually sold to Abbey National in 1992.

Scottish Mutual was but one of the Scottish life offices that gave Scotland a leading position in the provision of life assurance but it would be wrong to claim that Scotland were pioneers in this area.

The ancient Egyptians are believed to have practised a form of ship’s cargo insurance, known as bottomry. The first separate insurance contract is believed to date from 1350 and the Italians effected most of the early British insurance transactions.

Maritime trading and the great fire of London were major factors in the growth of insurance. The oldest surviving life policy is on a Londoner and it showed that even then insurers were masters of the small print. The man’s life was insured for twelve months but the insurers refused to pay up on the grounds that a month consisted of 28 days, so the claim was time-barred, but the court ruled that it was the calendar month that counted.

It was in the seventeenth century that the idea of life assurance as we understand it today started to develop slowly (assurance is the word used for a policy that covers a life; everything else is insurance.)

Many life companies that were founded quickly disappeared but others survived and went on to become household names.

The first mutual company to be founded in Edinburgh was the Scottish Widows Fund and Life Assurance Society. It came into being in 1815, the year of Waterloo, and was followed in 1823 by the Edinburgh Life Assurance Company, associated with Sir Walter Scot.

Around the same time the North British Insurance Company, which had been founded in 1809 as a fire office, extended its activities to take in life cover. The Scottish Union Fire and Life Insurance Company, founded in 1824, added life to its products a year later and in that year the Standard Life Assurance Company was founded.

Glasgow had the West of Scotland Insurance Company, founded in 1826 and later to become the Scottish Amicable, while in 1831 Scottish Equitable joined the ranks in Edinburgh. In 1833 the Caledonian Insurance Company, founded in 1805 as a fire office, also become a life office.

Then in May 1837 Scottish Provident arrived on the scene to become Edinburgh’s eighth life assurance office. Such a proliferation inevitably meant that many would go, and they did. While take-over was the name of the game in the 1980s and 1990s, only a year after it was formed in 1883 Scottish Mutual (then Temperance) received and rebuffed take-over advances from Scottish Life.

The Scottish life offices are members of an organisation called the Associated Scottish Life Offices (ASLO). At one time they had nine members: Glasgow-based FS Assurance (the minnow, and one of the first to be swallowed up), the Life Association of Scotland (no longer with us), Scottish Life (now part of Royal London), Scottish Provident (now part of Abbey National), Scottish Equitable (now part of Aegon), Scottish Amicable (now part of the Pru and discarded as a brand name), Scottish Mutual (now part of Abbey National), Scottish Widows (joined the Lloyds TSB stable in 1999) and Standard Life.

In the days of nine, ASLO would meet once a month. It was almost like a club: meeting for the benefit of the industry, acutely aware of what each other was doing and remembering all the time that they were competitors.

The meetings would last all day as they discussed topical issues , such as rates of commission for the intermediaries who sold their products. It had a bit of clout as a lobby organisation and in many ways reflected the insular outlook of many of the life offices.

Now ASLO has five members - Standard Life, Scottish Widows, Scottish Equitable, Scottish Life and Scottish Mutual and they meet quarterly.

Graham Pottinger has just taken over as chairman. He is chief executive of Scottish Mutual and is managing director of Abbey National’s long-term savings, which includes Scottish Provident branded products.

He says they discuss matters of general interest to the industry - such as proposals to reform polarisation - but clearly draw short of discussions about areas in which they compete with each other.

Sometimes their views will be passed on to the Association of British Insurers so that they can make them known to the relevant authorities. Clearly, ASLO is a shadow of its former self, as is the Scottish life sector, but that does not take away its proud history and the role it played in building the international reputation of Scotland as a financial centre.