Napoleon, two Scottish Ministers and the birth of the Insurance Funds industry.
Napoleon is credited with many achievements, but most lists don’t include his contribution to the foundation of one of Britain’s most famous financial brands.
On their website, Scottish Widows traces its origins back to March 1812, when a number of prominent Scotsmen gathered in the Royal Exchange Coffee Rooms in Edinburgh. It was a turbulent time for the UK with not only the Napoleonic wars but with war against the USA looming on the horizon.
The historic meeting was held to discuss the setting up of ‘a general fund for securing provisions to widows, sisters and other female relatives’ so that they would not be plunged into poverty on the death of the fund holders during and after the Napoleonic Wars.
The discussions and planning took some time and it wasn’t until 1815, the year of Napoleon’s ultimate defeat at Waterloo, that the Scottish Widows Fund and Life Assurance Society opened its doors as Scotland’s first mutual life office.
There is however a story behind the story and how in fact the origins of the brand, and indeed the industry, can be traced even further back in history to two Church of Scotland ministers, who actually deserve the credit for inventing the first true insurance fund way back in 1744.
Robert Wallace and his friend Alexander Webster were not only ministers but also men of vision.
The two ministers were unhappy at the way the women and children of their fellow clergymen were often treated when the men of their households died. They were generally left at the mercy of the fellow ministers, and despite relying on Christian benefactors, were often left homeless and without any income.
Wallace and Webster came up with an ingenious plan to curtail this problem, now recognised as the first true insurance fund in history. They proposed that each of their church’s ministers would pay a small portion of his income into a fund, which would then invest the money. Then, if a minister died, his widow would receive dividends from the fund’s profits. This would allow her to live comfortably for the rest of her life.
The key question was how much each minister would have to pay in so that the fund would have enough money to deliver on its obligations. Webster and Wallace realised that they had to be able to predict how many ministers would die every year, how many widows and orphans would be left behind, and how many years the widows would live on for.
Recognising their own limitations, they contacted Colin Maclaurin who was a professor of mathematics from the University of Edinburgh.
The three of them collected data on the ages at which ministers had died and used it to calculate how many were likely to pass away in any given year.
The calculations they made concluded that there would be 930 living Scottish Presbyterian ministers at any given time and that an average of twenty-seven ministers would die each year, eighteen of whom would leave widows. Five of those who did not leave widows would however leave orphaned children and two of those survived by widows would also be out-lived by children from previous marriages who had not yet reached the age of sixteen.
They then further calculated how long there would be before those widows either died or remarried, as both eventualities caused payments to cease.
The final calculations suggested that by contributing £2. 12s. 2d. a year they would guarantee widows would receive £10 a year (a living income in those days). With additional contributions, a minister could guarantee his widow would receive a greater sum each year.
The bottom line on all their calculations was that by 1765 the Fund for a Provision for the Widows and Children of the Ministers of the Church of Scotland should have capital totalling £58,348.
Records show that actually the capital in 1765 was £58,347, just £1 out.
Footnote: The famous caped Scottish Widow didn’t appear as the brand’s icon until 1986 when she made her debut in a television advert directed by David Bailey. The ‘living logo’ was created to be an icon that confronted all the negative values associated with the word ‘widow’ and presented the positive values – strength, reliability, integrity, innovation and heritage. Her impact was immediate, Scottish Widows became a household name and ‘awareness’ increased from 34% to 92%