THE fifth anniversary of the Scottish Widows'
Fund, 1st January 1820, may be taken as the true turning-point in its
fortunes. Down to near the close of 1819 there had been progress —sure,
indeed, owing to the caution in avoiding anything of the character of
undue risk, and to Patrick Cockburn's vigilance in guarding the funds
against inroads for current expenditure, but disappointingly slow.
Among the influences holding Scottish people aloof
from life insurance must be reckoned the strict character of the national
religion. Evidence of that influence may be found in the address of the
Rev. John M'Laren, D.D., of Larbert and Dunipace, who, as an extraordinary
director, presided over the Eighty-first Annual General Court, in May
"To you who are listening to me," he
said, "it will appear well-nigh incredible that at the time when our
Society was founded, aye, and for many years afterwards, there were people
who looked upon it as wrong—almost sinful—for a man to attach himself to
such an association. When I was presented to the Church of Larbert
forty-eight years ago , I thought it would be a prudent thing to
insure my life, mainly because, being very young, the annual premium would
not be a heavy burden. Before adventuring on the step, I thought it right
to ask the advice of a venerable friend, held in high esteem by all who
knew him for his sagacity and longheadedness. He heard what I proposed to
do, and to my astonishment replied that he had not felt justified in
joining any Insurance Company, because he regarded the doing so as nothing
better than a species of gambling—gambling on the probabilities of life. .
. . I met some other worthy men who were of the same mind, who would have
shrunk as sternly from counselling their sons to take out a policy of
insurance as any prudent father among ourselves would from encouraging his
son to visit the tables of Homburg or Monte Carlo."
If this feeling prevailed among serious persons in
1847, we may be sure that it was even more general in 1819, when the
Manager could show no better results than the following of five years'
At this rate of increase it would have taken a very
long time for the Scottish Society to attain to anything approaching the
dimensions which its friendly model the Equitable could boast; but
immediately after the general meeting of 8th November 1819 there took
place a sudden increase in proposals for assurance, arising from a
peculiar condition in the terms of the Society's Constitution. It was
provided in the Articles of Constitution that the first investigation
should take place at the end of ten years after the formation of the
Society, and that two-thirds of the surplus fund that might then be
ascertained should be allocated among such of the members as had accepted
policies of assurance more than five years previous to such investigation.
Hence, at the investigation to be held as on 1st January 1825, no members
would share in the divisible surplus who had not effected insurance before
31st December 1819.
seems to have been enough to accelerate the action of those who were
contemplating insurance, and to cause them to join the Society in time to
entitle them to share in the bonus distribution five years hence; which
may be held to account for the sudden access of numbers during the closing
months of 1819.
But the matter was not
allowed to rest there. The Articles of Constitution provided that, after
the first investigation at the end of ten years, investigations should be
made every seven years, with corresponding distributions of surplus. This
accentuated the anomalous disabilities incurred by those who did not
insure at the proper time.
For example : a
person insuring on 1st January 1820 would have to wait until 1st January
1832 before he derived any of the special benefit attaching to membership
in a mutual society, notwithstanding that his contributions for five years
previous to 1825 had gone to swell the surplus at the second
investigation. And whereas the bonus was calculated, not in proportion to
the number of annual payments of premium, but solely in proportion to the
amount of benefit insured, he would derive no advantage in the
distribution at 1st January 1832 over a person insuring on 30th December
1826, although the policy was seven years older.
The Court of Directors fully recognised the inequity
involved: the difficulty was how to remedy it. On 7th February 1820 the
problem was remitted for solution to a committee consisting of Mr. John
Clerk, [1757-1832. Solicitor-General for Scotland in "All the Talents"
Administration, i8o6. Raised to the Scottish bench in 1823 as Lord Eldin.
His bodily infirmity interfered seriously with his reputation as a judge,
but he had a lively Wit. One day in the High Street he overheard one young
lady say to another "Yonder goes Johnnie Clerk, the lame lawyer." Clerk
turned and said: "No, madam; I may be a lame man, but I'm not a lame
lawyer."] Mr. James Moncrieff, [1776-1851. Succeeded as 9th Baronet in
1827; raised to the Bench as Lord Moncrieff in 1829.] Mr. Patrick
Cockburn, and Mr. David Wardlaw.
following the deliberations of that committee to their important finding
and conclusion, the following notes may be found interesting as evidence
of the growing strength of the Society.
May 1821.—The limit of risk on a single life was extended to L2000, except
in such cases wherein "on any ground any addition above the ordinary rate
of premium is exacted." This extension seems to have been anticipated by
the decision of the directors on i 5th April foregoing to accept a
proposal by Mr. Archibald Geddes, aged 28, for an endowment of £2000
payable at 50 years of age. There is no mention of reassurance, and the
charges against the proposed were
18th rune 1821.—An Extraordinary Court took into
consideration the hearing of one of the Articles of Constitution which
provided that if any person whose life was assured by the Society should
die upon the high seas (persons passing in His Majesty's packets between
Great Britain and Ireland, or in the usual passage vessels sailing between
Leith and London, excepted) his policy should become void and the
liability of the Society should cease and determine. The exception to this
rule having been extended on 1st February 1819 to persons travelling "by
all the regular and established ferries in the United Kingdom," the
Extraordinary Court now considered "that passage by steam vessels has of
late years become frequent, and, so far as known to this Court, is at
least equally safe with conveyance by the vessels falling under the
foresaid description in the Articles of Constitution" (i.e. sailing
packets), resolved that the exception should be extended to insured
persons "passing along the routes described, and in all routes of a
similar description within the United Kingdom, in steam vessels or packets
as well as in the usual passage vessels sailing on such routes."
xotlz September 1821.—The corner flat facing Princes
Street, at the south end of St. David Street, was purchased for C945 as
premises for the Society.
—A merchant in Glasgow, having an insurance for £2000 on the life of Lord
Fife,' offered to pay the additional premium due on account of his
lordship going to Paris " for a few weeks," and "for the risk attending
his return from that country to Britain," suggesting that there should be
no extra charge as the voyage "is little more than crossing from Leith to
Kinghorn." The directors granted the required license on payment of an
additional premium of 2s. 6d. per cent on the sum assured "for the sea
risk from Great Britain to France and back by way of Dover and Calais."
Thereupon Mr. Forlong's agents wrote to say that Lord Fife [James, 4th
Earl of Fife (1776-1857); joined the Spanish army as a volunteer in 1808,
and rose to the rank of major-general. Wounded at Talavera and Fort
Matagorda.] might not return by way of Dover and Calais, but from Dieppe
or some other port in the Channel, and asking for the license to be
extended accordingly; which was agreed to.
The rule affecting sea risks was altered by the Extraordinary Court of 5th
November 1821 so as to allow insured persons "to pass occasionally by sea
from one part of the United Kingdom to another, and also in time of peace
to pass occasionally, in King's ships, steam-vessels, or other decked
vessels between British ports and such foreign ports as lie between Ostend
and Havre de Grace, both included, without extra premium."
1st October 1821.—The proposal of Roger Aytoun,
W.S., for an assurance for C16o on the life of Lieut. D. M. Sanders, 49th
Regiment, to cover military risk in Europe, the Cape, and the East Indies,
and the voyages between these parts, was accepted with the addition of 7
per cent per annum on the sum assured, making a total payment of:
12th November. -At the eighth annual general
meeting, the President, Lord Rosebery, took the chair for the first time.
In the course of his address he said that "he felt a degree of national
pride in observing how much the existence of such institutions [as the
Scottish Widows' Fund] excites the astonishment of foreigners, to whom the
very name of Life Assurance seems yet to present an aspect of inscrutable
mystery, and to convey something like the ludicrous idea that there
positively exist establishments by means of which human life may be
actually secured against the numerous casualties to which it is exposed."
Mr. James Gibson of Ingleston, an extraordinary
director, in the course of some remarks congratulating members on the
state of the Society, which in the course of seven years' existence had
accumulated funds to the amount of £26,154, drew a comparison between its
growth and that of the Equitable.
Equitable," he said, "has been established little more than fifty years,
and its prosperity has been unexampled. It now possesses a capital almost
beyond belief. Two years ago, when I was in London, I saw a state of their
funds, one article of which consisted of seven millions of three per cent
Government stock. This capital they have accumulated, notwithstanding the
immense benefits which the proprietors of their policies have received. In
many instances there has been paid upon policies two, three, and four
times the amount of the sum originally insured—payments having been made
of £2000, £3000, and £4000 upon policies granted for insurance of £1000,
the surplus being made good from the profits of the establishment. The
Scottish Society never can rival the Equitable Society in number of its
members or the amount of its capital, the field in this country being so
much more limited; but the prosperity of the Scottish establishment gives
undoubted assurance that the benefits to each individual member will be as
As a comment upon the words in
italics, but in no spirit of vainglory, it may be noted how far the
Scottish Society has outstripped its English ally. At 31St December 1909
the Equitable had sums assured by 6250 policies, amounting, with bonus, to
£8,400,000. At 31st December 1908 the corresponding liabilities of the
Scottish Widows' Fund were £39,000,000 assured by 58,712 policies.
7th 7anuary 1822.—A policy for £300 was granted on
the life of a military cadet aged 20, with 7 per cent per annum additional
on the sum assured, viz. 5 per cent for voyage to and residence in India,
and 2 per cent for military risk in India.
6th May.—The Manager recommended the expediency of reducing the rates of
present annuities, owing to the difficulty he experienced in finding
profitable investments for the purchase money, and also for the care taken
in selecting lives on which annuities were purchased.
19th August.—Mr. David Cleghorn, having two policies
on his life for £i000 each, asked for a license to travel to Dresden and
Holland, which was granted on payment of an additional premium of 2s. 6d.
per cent on the sums assured.
August.-Sir Walter Scott having applied for an assurance on the life of
his brother, Thomas Scott, W.S., paymaster of the 70th Regiment, serving
in Canada, the proposal was accepted for £1000, with an additional payment
of 2 per cent on the sum assured for residence in Canada, conditionally
upon the receipt within six months of a medical certificate corroborating
Dr. Bryce's certificate of Mr. Scott's health, etc. The policy was
declared void, and the entry money and premium were returned to Sir Walter
[Sir Walter became an extraordinary director of the Edinburgh Life
Assurance, founded in 1823.] on 18th November, in consequence of the
failure of Thomas Scott to forward the stipulated certificate. In fact,
Thomas died before the end of the current year.
4th November 1822.—The directors, taking into
account the Society's accumulated funds £41,090 :11 : 5) and its annual
revenue (£10,635 : 13 : 6), and that various proposals for insurance had
been made for sums greater than the existing regulations authorised,
extended the maximum risk on single lives to
A barrister going to practise in Bombay was admitted
a member on payment of 5 per cent additional on the sum assured for Indian
18th November.- The directors met for the
first time in the new office of the Society, 2 South St. David Street.
7th July 1823.—The earliest suggestion for establishing a new class of
assurances at reduced premiums, but with no claim to a share in surplus
profits, was referred to the Quarterly Court for consideration, but no
further action was taken at this time (see minute of 11th June 1832).
8th December 1823.-A license was granted to Sir Charles M. Lockhart of
Lee, whose life was insured for £2500, "to sail in his pleasure boat," on
payment of an additional premium of los. per cent on the sum assured.
2nd February 1824.—The directors having at previous meetings approved of a
loan of £1500 to Mrs. Halkett-Craigie at 7 per cent, and to Mr.
Whyte-Melville of Bennochy and Strathkinness of £10,000 at 7 per cent, the
Manager reported that, in order to make these loans, it might be
necessary, for the first lime, to overdraw the bank account. The
Extraordinary Court thereupon empowered the trustees to overdraw to the
9th February. - An overdraft of £4000
on- the account at the Royal Bank was arranged at 4 per cent interest, the
same to be repaid by instalments from day to day.
July.—The Manager reported that the aforesaid overdraft at the Royal Bank
had been repaid, and that there was now £4000 to the credit of Society at
the two banks.
The Committee appointed on 7th February
1820 to consider the question of the division of surplus funds, presented
a weighty report on 5th November 1821, recommending, inter alia, the
following changes in the system laid down in the Articles of Constitution
1. That after the investigation as at 1st January
1825, investigations should be quinquennial instead of, as originally
2. That at every investigation
subsequent to 1st January 1825 every member of the Society should share in
the distribution of surplus funds, irrespective of the date at which he
joined, but calculated in proportion not only to the amount of the benefit
assured, but also in proportion to the number of annual contributions paid
by such member since the previous investigation.
annuities should share in the profits.
4. That bonuses
should be compound: that is, proportioned to the benefit assured to any
member, plus such bonus or bonuses with which it may have been credited
5. That single premium payments, or any
other mode of contribution different from annual payments, should carry
the right to bonus additions to benefits.
contingent prospective bonuses be paid.
The report was
taken into consideration by an Extraordinary Court on 14th January 1822,
but the case proving too complex to enable it to be grasped at once in all
its bearings, decision was postponed till the next quarterly meeting, Mr.
Cockburn being requested to prepare and circulate "such further
observations explanatory of the report as might tend to elucidate the
principles therein contained." This he did most thoroughly, dealing also
with a fresh difficulty which arose through the old members (that is,
those who had joined the Society previous to 1st January 1820) demurring
to having their prior rights infringed by the proposed new principle of
distribution, which, they pointed out, was a departure from the practice
of the Equitable Society, whereon the Scottish Widows' Fund was
professedly modelled. The exemption of new members from the five years'
qualification for sharing in the distribution of surplus at future
investigations would diminish, they pointed out, the source whence old
members were entitled to look for their bonuses, thus involving a breach
of the conditions which they had accepted in joining the Society. This
difficulty was overcome by the adoption of a rule under which a portion of
the additions to which the old members would be entitled at the
investigation of ist January 1825 should be held in suspense until the
second investigation in 1832, when that portion of the additions should
become a vested interest in the survivors, and a preferable charge upon
the surplus then to be declared.
"In this way," said Mr.
Cockburn, the interest of the old members is ultimately provided for
without violating any of the fundamental articles of the Constitution ;
and they, in common with the new members, who may die during the interval
between the first and second periods of investigation, will secure to
their families additions corresponding to the time of their survivance,
which was one of the great ends proposed to be attained in altering the
original rule of distribution. The only difference to the old members is
that a portion of the addition to which they would have been entitled at
the first period of investigation is held in suspense until the second
period of investigation (except in regard to those who die in the
interval, who will receive the full amount), and that their becoming
entitled to that portion is dependent upon there being a surplus at the
second period. When, however, the old members reflect that in lieu of that
risk (which in the present flourishing state of the Society can be
accounted as nothing) they will secure to the families of those who die
before the second period of investigation prospective additions
corresponding to the time of their survivance, and that they achieve a
very important improvement in the mode of distribution of the surplus
funds, I cannot anticipate any objection on the part of that class of
The recommendations of the Committee, having
been repeatedly and anxiously discussed by the directors, were at last
laid before the eleventh annual General Court of the Society, held in
Oman's Waterloo Tavern on 8th November 1824, immediately before the first
investigation and distribution of surplus. The recommendations aforesaid
had undergone several important modifications in the three years during
which they had been under consideration. The proposal to shorten the
investigation period from seven to five years had been abandoned; nor was
any change made in this respect until the obligation to hold quinquennial
investigations was imposed upon the Scottish Widows', in common with all
other Assurance Societies, by the Assurance Companies Act of 1909; the
proposal to extend the bonus system to annuities and short term policies
had been withdrawn, the benefit of participation being restricted to the
holders of policies for the whole term of life.
General Court was numerously attended, under the presidency of Lord
Rosebery; the recommendations of the Committee were cordially approved,
and were referred for further consideration by a General Court to be held
on i6th May 1825. The General Court was so held, but it is curious that
there is no reference in the minutes to the matter which had been
specially remitted to it. The only business recorded as having been
transacted was the granting of authority to the directors to apply for a
royal charter of incorporation and the appointment of Mr. Wotherspoon, son
of the deceased Manager, as Assistant Manager to Mr. M'Kean.
It was natural that the result of the first investigation should be
awaited with intense interest by the members of the Society, especially by
the old members who alone were entitled to participate in the distribution
of surplus. The result, as announced to an Extraordinary Court on 7th
February 1825, exceeded the most sanguine expectation. The gross funds had
rolled up to the respectable figure of
The first bonus was declared by an adjourned Extraordinary Court on iith
April 1825 as follows
A vested bonus of 12 per cent on
all policies existing at 1st January 1825, with a further bonus of 14 per
cent to be paid on all claims emerging before 1st January 1832, making 26
per cent in all. There was a pardonable note of exultation in Mr.
Cockburn's address to the general meeting. He had been all along the
resolute guardian of the young Society's stability, resisting consistently
every attempt to meet current expenses out of capital, and, after the
Society had extricated itself from its initial difficulties, firmly
opposing proposals to reduce the premiums in order to attract more
business. One most favourable feature in the situation was that, while the
Government and Bank Stocks stood in the balance sheet at the figure
(£36,287 :16 : 9) at which they had been bought, they had all risen in
value since ; a state of matters which may he wistfully regarded by
directors of joint-stock concerns at the present day, who have become
painfully inured to the depressing duty of writing down the value of their
At the same time Mr. Cockburn warned the
meeting against assuming that the existing buoyancy of their resources was
sure to continue. Their experience so far showed a rate of mortality among
the members considerably lower than that presented in the Northampton
tables whereon their rates were founded, owing in an important degree to
the fact that the deaths in the early stages of a Society are much less
frequent than they become in its later stages as the average age of the
insured increases. Mr. Cockburn supported the conclusion at which he had
arrived by pointing out that the deaths of members during the first ten
years of the Scottish Widows' Fund had been one-sixth less than those in
the older Equitable Society during a corresponding period.
"We ought not, therefore," he continued, "to calculate too highly upon the
magnitude of the surplus funds arising during the early stages of an
assurance society. Those institutions which diminish their premiums upon
the expectation that the surplus funds will be the standard of their
progress proceed upon a very insecure basis, and are probably laying the
foundation of ultimate loss and bankruptcy."
course of Mr. Cockburn's long address there occurs one passage which,
spoken by this confident, yet cautious, pioneer in Scottish life
assurance, merits attention from members of a Society occupying the
position in public esteem now held by the Scottish Widows' Fund.
"When I recollect the origin of our Society, consisting of some half dozen
members with a fund of £500 or £600— when I consider the pains and trouble
with which our present fund of £75,000 has, during a period of ten long
years, been scraped together, and contrast that amount with the millions
of capital which, in an instant, are everywhere springing up around us, I
cannot help shrinking under the idea of the insignificance of our
establishment, and am lost in wonder and admiration at the riches which,
after years of deep complaint from all the various classes of the
community one after another, have now poured in upon our heretofore sore
oppressed, and now happy, land. While I am absorbed in these reflections,
however, there is one ray of comfort comes across my mind, from which I
have no doubt you will derive equal consolation—that if the sums which we
assured for the benefit of our families are not guaranteed by millions, we
have not to pay for that guarantee. . . . Under the protecting care of a
Divine Providence, who has promised to be a husband to the widow and a
father to the fatherless, we have every reason to hope that our
institution, which has now got over the risks and perils of the infant
state, will not only be the means of communicating comfort and happiness
to the friends and relatives of the present members, but that it will shed
its benign influence over generations yet unborn."
directors were not unmindful of the help and guidance they had received
from disinterested friends; wherefore on 24th March following the first
investigation the Court allotted a sum of 120 guineas "for purchasing
snuff-boxes or pieces of plate to be presented by the Society to Mr.
Morgan, Lord Eldin, and Mr. Moncrieff as a grateful remembrance of their
services in revising the Articles of Constitution and of the benefits
derived from their occasional advice during the progress of the Society,
and to Mr. Beveridge for his valuable assistance in framing and adjusting
the clause of distribution."