A Brief History Of The Insurance Business
Individuals, nations, and companies all face a number of risks every day. Each has to decide how to handle all of those risks.
If risk is like a blazing coal that may ignite a fire at any second, then insurance is the fire extinguisher. Nations and companies as well as its citizens and members need a mechanism to help spread risk to organizations that can better absorb their risk for a premium.
The main idea of insurance, spreading risk, has been in existence since the beginning of time. Whether it was hunting a dangerous animal in a group to reduce the risk of being the one faced with death or shipping goods in different ships to avoid losing the entire shipment to pirates or natural causes, people have always looked for ways to handle risk.
Almost 4000 Years of Documented History
Hammurabi’s Code
The first evidence of documented insurance principles appeared around 2000 B.C. in King Hammurabi’s Code addressing a method of handling debt.
Marine Insurance
Written Marine Insurance contracts date back to the 1300s in Italy. By the 1600s, insuring cargo while being shipped was widely used within the maritime nations of Europe. In 1688 in London, the first insurance company was established. It was formed at Lloyd’s Coffee House, a place where merchants, ship-owners, and underwriters met to transact their business. In time, this became organization became known as the Lloyd’s of London Insurance Company.
Fire Insurance
State or municipal funded Fire Insurance dates back to 1623 in Germany. The first American fire insurance company was founded in the late 1700s when Benjamin Franklin became a driving force behind the Philadelphia Contributionship for the Insurance of Houses From Loss by Fire. The current American structure of Fire Insurance, commonly referred to as Homeowner or Renters Insurance, was not prevalent in the US market place until the 1900s. Lending companies generally require homeowners insurance when they are carrying their mortgage. Even once a mortgage is paid off, homeowners insurance is the most cost-effective way to protect that major investment.
Life Insurance
Life Insurance as a business didn’t really develop until late 1600 in England with the establishment of The Society of Assurance for Widows and Orphans. By the early 1800s, life insurance became popular. The Presbyterian Synod of Philadelphia was behind the first life insurance corporation in America being established for the benefit of Presbyterian ministers and their families. After World War I, life insurance sales sky-rocketed and in the post-World War II economic boom, it became so popular that by the mid-1970s, almost 72% of the adults and more than 90% of all husband and wife families owned some form of life insurance.
Health Insurance
As America neared the 1900s, the first Auto Insurance policy was written and with inventors and entrepreneurs developing a myriad of new products, new types of insurance were being developed to address the risks of an increasingly modern life. Medicare and Medicaid legislation in 1965 was a pivotal point in managed health care insurance. Today when browsing the Internet, The Affordable Care Act, or ObamaCare, is front-and-center.
Not only have insurance needs dramatically grown over time but also the way we buy insurance has changed. In the 1990s, the emergence of the dot.com made it possible for insurance companies to better serve its customers online. Once a time consuming and laborious process, the insurance companies recognized the need to improve and expand business through streamlining its processes. Today, people can easily buy insurance policies online 24/7 and even make payments without leaving their homes.
What is the future of insurance?
Just as driving a car opened up new risks, so has the Internet. Individuals and companies have been the target of cyber-thieves. Cyber & Data Risk Insurance, Cyber Liability Risk Insurance and other related insurances are in place and continue to be developed to meet the needs of all of us so that we can have peace-of-mind.
