Life Insurance as Early Adopters and Influencers of Information Processing Technologies

When most people think about innovation, the insurance industry doesn’t pop into their minds. Yet camouflaged behind their conservative reputation is a stunning history of information age early adoption and pioneering influence. Not only were insurance companies at the forefront of commercial computer use, but their implementation played a defining role in the path that IT technologies would take in the course of the 20th century.

Life insurance’s dance with computers begins all the way back in 1890. The statistician and inventor Herman Hollerith had invented a device called the tabulating machine. This machine was actually a combination of electromechanical devices that used punched cards to record, sort and calculate data – what we today call data processing. In its totality, the machine was a primitive version of a modern spreadsheet program like Microsoft Excel.

After World War II, vacuum-tube computers became commercially available for the first time. Again, life insurance was one of the first industries to jump onboard. In particular the IBM 650 became the computer of choice for most small to medium sized insurance companies. The very first one was installed in 1954 at the John Hancock Mutual Life Insurance Company in Boston. Later this was replaced by the transistor-based IBM 1401, often called the Model T of computers. The main reason for the popularity of these models was that they used the same punched card systems that the insurers had already been using in their tabulating machines. For larger firms, these smaller units were added as peripherals to their mainframes to maintain compatibility with the older punched-card systems.