The Equitable Life Assurance Society
| Mutual | |
| Industry | Financial Services |
| Founded | 1762 |
| Headquarters | London, England, UK |
|
Key people
|
Ian Brimecome - Chairman |
| Website | Equitable Life Assurance Society |
The Equitable Life Assurance Society (Equitable Life), founded in 1762, is a life insurance company in the United Kingdom. The world's oldest mutual insurer, it pioneered age-based premiums based on mortality rate, laying “the framework for scientific insurance practice and development” and “the basis of modern life assurance upon which all life assurance schemes were subsequently based”.
At its peak, Equitable had 1.5 million policyholders with funds worth £26 billion under management, but it had allowed large unhedged liabilities to accumulate in respect of guaranteed fixed returns to investors without making provision for adverse market changes. Many policyholders lost half their life savings, and the company came close to collapse.
Following a July 2000 House of Lords ruling, and the failure of attempts to find a buyer for the business, it closed to new business in December 2000 and reduced payouts to existing members. The 2004 Penrose report found that the company had made over-generous payouts leading it to be under-funded. A 2007 European report concluded that regulators had focused on solvency margins and failed to consider the increasing risk of accrued terminal bonuses.
The October 2010 Spending Review by the coalition government announced compensation of £1.5bn – above the level recommended by the review conducted by Sir John Chadwick and below the £4-4.8bn loss calculated by consultants Towers Watson.
The Society, established via a Deed of Trust in September 1762 with the name of the "Society for Equitable Assurances on Lives and Survivorships", offered both whole life and fixed term policies. Premiums, which were constant for the duration of the policy, were based on a method devised by the mathematician James Dodson using mortality figures for Northampton and the amount payable on death, the basic sum assured, was guaranteed, a major advantage at the time. As Dodson had died five years earlier, Edward Rowe Mores became its chief executive officer with the title of actuary—the first use of the term—though he was an administrator rather than a statistician. The first modern actuary, William Morgan, was appointed in 1775 and served until 1830. In 1776 the Society carried out the first actuarial valuation of liabilities and subsequently distributed the first reversionary bonus (1781) and interim bonus (1809) among its members. It also used regular valuations to balance competing interests. Its products therefore met the description of a modern With-profits policy.
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