The 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". After closing to new business in 2000, parts of the business were sold off and the remainder of the company became a subsidiary of Utmost Life and Pensions in January 2020.

At its peak in the 1990s, 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. Lord Penrose's 2004 Equitable Life Inquiry 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. In 2010, government announced compensation to policy-holders of £1.5bn.

In June 2018, Equitable Life announced that Life Company Consolidation Group (now Utmost Life and Pensions) had agreed to buy the company for £1.8bn, with most policies to be transferred to Utmost's Reliance Life subsidiary and converted to unit-linked. Some of the proceeds of the sale would be returned to the remaining 400,000 policyholders in the form of increased bonuses on their policies. The sale completed at the end of 2019.

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.

The society sought to treat its members equitably and the directors tried to ensure that the policyholders received a fair return on their respective investments. Throughout the society's history, the allocation of bonuses (at regular intervals of up to five years) was a carefully thought-through decision based on actuarial advice, designed to promote fairness and equity between different groups and generations of policyholders.

Its methods were successful enough for it to be able to reduce its premiums by 10% in 1777, and there was a further reduction in 1781. By 1799 the society had assets of £4m and its 5,000 membership subsequently doubled to 10,000 in 1810. Famous 19th-century policyholders included Samuel Taylor Coleridge, William Wilberforce and Sir Walter Scott.

The Life Assurance Companies Act 1870 (33 & 34 Vict. c. 61) was passed, "requiring all life offices to publish financial data on the lines so long followed by the Equitable."