From Rome to Now: Ancient Roots of Modern Benefits

MarketFacts Home

Author

Yuliya Esipov
Associate Research Director, Workplace Benefits Research
LIMRA and LOMA

December 2024

While many of us may think of workplace benefits as a modern solution to meet employees’ dynamic needs and recognize and address employees’ financial security and wellness protection, the concept itself has surprisingly deep historical roots, with some components dating back to ancient periods of Roman emperors, and other ideas evolving exponentially over the past century.

The Beginning

The “birth” of the employee benefits concept brings us back to 100 B.C, when Gaius Marius introduced the earliest known form of life insurance. He formed the first “burial club” for the members of his military, which allowed club members to cover their funeral expenses. At this time, the Roman Empire crucially needed a fresh influx of loyal soldiers, and this recruiting incentive was undoubtedly a prudent political decision.

Originally, the burial clubs “benefited” only the deceased person, who knew that his membership would provide a proper burial. It was not exclusively related to monetary expenses. It also covered the spiritual customs that were intensely popular at the time of the Roman Empire. Over time, the clubs implemented new benefits and started to offer a stipend for the deceased’s kin.

The Roman Empire also presented an example of the first retirement plan. In 13 B.C., Caesar Augustus offered 13 annual salaries to his retired soldiers in return for their service. This “act of generosity” in no sense represented Augustus’ caring nature for his servicemen. Instead, it was a calculated decision to keep his retired yet physically adept soldiers from joining an uprising as well-compensated veterans. It is unclear how the Roman general came to the magic figure of “13 annual salaries” as the sufficient retirement income amount; yet 2,000 years later, financial advisors recommend a similar sum, at least 10 to 12 times an individual’s annual income to retire.

Employee Benefits in the US

It took a few centuries and the industrial revolution before the employee benefits concept began to take shape in its modern meaning. While Augustus was trying to create an “employee benefits” program for the purpose of sufficient compensation to keep his legions away from rebellion and Gaius Marius focused on the recruitment component, the American Express Company established the first U.S. corporate pension plan for long-term employees to promote their loyalty in 1875 — at a time when the demand for workers vastly exceeded their supply. Since then, advances in science, medicine, technology and legislation have become major factors in shaping the development of modern employee benefits.

In mid-1870, two key events — progress in medicine that turned hospitals from a “destination of last resort” to places that offer health recovery as well as increasingly hazardous conditions that many workers faced during rapid industrialization — resulted in the Granite Cutters Union’s pioneering the first national sick benefit program in the U.S. While it was an early form of group health insurance, de facto, the plan mostly protected against loss of income, rather than covering medical expenses.

At the turn of the 20^th century, medical care in the U.S. did not cost much, due to the limitations of what could be offered to the patient. Unsurprisingly, the early examples of the employee benefits plans, such as that offered by Montgomery Ward in 1910-1911, focused on group accidents and sickness coverage, rather than medical expenses. The first group life insurance policy was issued at the same time to employees of Pantasote Leather Company and Montgomery Ward, and in the following years, employers began to advertise these plans as a sound family security option.

The Rise of Group Health

The medical advances in the first few decades of the past century rapidly changed the cost of patient care. At the same time, the concept of keeping the workforce and their dependents healthy to increase productivity, also gained traction. In 1937, the industrialist Henry Kaiser offered his Grand Coulee Dam employees the first “true” group health insurance plan, followed by the Kaiser Shipyards in Oakland. Group policies entered the insurance realm at the time when employees were especially vulnerable and looking for a trustworthy foundation for their health and financial protection.

Compared to medieval guilds, churches and associations, employers presented a good alternative to turn the perception of insurance as a gamble into the concept of a reliable source for well-being. For the past 80 years, employers have been able to nurture employee trust across multiple fields. These efforts paid off, and today, the overwhelming majority of employees (84 percent), according to LIMRA’s 2023 report, Harnessing Growth and Seizing Opportunity, state that they rely on their employer to provide guidance and assistance for understanding and selecting their benefits.

While the first Kaiser plan served 100,000 shipyard workers, currently more than 90 million U.S. workers have access to private group health plans, and almost 60 million of employees are covered by employer-provided medical insurance. For retirement, in 2022, employees across all age groups named workplace plans as the number one trigger to start retirement savings, according to LIMRA’s 2022 Institutional Retirement Reference Guide.

Roman emperors had accurately envisioned employee benefits to be built on the empirical data that defines loyalty, recruitment and the retention needs of employers. The question remains, how does industry respond to this agenda, as the values and pressures that affect the workforce change exponentially? In the mid-1950s, the “core” group of employee benefits began to include dental and vision insurance plans. It’s hard to imagine, but back then, the common dental plan had the “same” maximum: averaging $1,500 per year (equal to $9,000 of dental care if adjusted to inflation).

Future of Employee Benefits

Currently, the “suited deck” of employee benefits counts multiple dozens of variable options. Some are guided by the legislative requirements, and some are driven by technological advancements. Still, employee benefits are not in the game of numbers, and future success depends on the employers’ proficiency to build a grounded relationship with the workforce. A surge in generative artificial intelligence (GenAI) aims to address these challenges, facilitating the synergy between employers, employees and group benefits providers. Will the successful enterprise be driven by a human intuitive visionary or chaperoned by a large-data-skillful GenAI?

1155-2024_MF_December_Cover Images_480x270_72dpi.jpg