James Dodson, Richard Price, and the beginning of actuarial science
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1774
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Annoyed by being denied life insurance due to his "advanced age," 45-year-old Englishman James Dodson developed a mathematical solution in order to form a more equitable base upon which to calculate premiums as a percentage of life expectancy. This principle was to be adopted by the Equitable Life Assurance Society in 1762.
Using Dodson's work as a starting point, the Welshman Richard Price developed a cost and accounting model. In his 1774 work Observations on the proper method of keeping the Accounts, and determining from year to year the state of the Society for Equitable Assurances on Lives & Survivorships, he calculated profitability in life insurance based on current and expected mortality. Because of this, the current state of the operations could be assessed more precisely. From then on, life insurance no longer relied on speculation.
Using Dodson's work as a starting point, the Welshman Richard Price developed a cost and accounting model. In his 1774 work Observations on the proper method of keeping the Accounts, and determining from year to year the state of the Society for Equitable Assurances on Lives & Survivorships, he calculated profitability in life insurance based on current and expected mortality. Because of this, the current state of the operations could be assessed more precisely. From then on, life insurance no longer relied on speculation.
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