History of Insurance and Start of Modern Insurance Policies

by admin | Posted on Tuesday, November 17th, 2015

Insurance is a concept that has been accepted as a necessity since the existence of human being. The term may not be used, a formal agreement may not be in place or a policy issued. However, people understood the concept and agreed upon it as a means of living in a community and in the spirit of helping each other. If one of their members suffered a catastrophic loss the rest of the community would step in and help as much as they can. This would often be enough for the person to get back on his/her feet.

History of auto  Insurance

First Insurance Contracts

A modern policy we know has two essential elements; an agreement to cover the loss and premium payment in return. One of the first recorded policies that carry these elements can be traced back to Mediterranean merchant sailors in 1750 BC. When merchants secure a loan they used to pay additional premium in return for the agreement that the lender would cancel the loan should the shipment is lost at sea or stolen. This arrangement is similar to a modern insurance policy in which there is an explicit agreement to cover the loss and premium payment for the consideration.

Beginning of Life and Health Insurance

First life and health insurance policies can be traced back to Spartan around 600 BC. Spartan soldiers risked their lives for the Spartan causes. In return there was a system in place to look after their families and pay for their life expenses if the soldier was killed or incapacitated. Their children were considered to be the responsibility of the state and they were looked after and educated.

First Signs of Reliable Insurance Policies

First standalone insurance contract was issued in Genoa, Italy in 1347. These contracts are special because they were not only promises but the insurance premiums collected was backed by land or estate pledged as security for the policyholders. The first book on insurance was published in 1552 under the title of “On Insurance and Merchants’ Bets” by Pedro de Santarem.

Start of Insurance Companies

London can be considered as the city where first insurance company was founded. The great fire of London in 1666 destroyed about 13,000 homes. This catastrophic event led to shift from wooden houses to brick houses. And it highlighted the need for a compensation scheme. First established property insurance can be traced back to the company, the “Insurance Office for Houses” formed by economist Nicholas Barbon and 11 associated established in London in 1681. They managed to insure 5,000 brick built homes.

The foundation of the first insurance company that exist today was laid in the same era. Lloyd’s of London is today one of the largest insurance markets in the world and started in Lloyd’s Coffee House in London by Edward Lloyd in 1688. This coffee house was frequented by sailors and sea merchants and was a source of shipping news. Edward Lloyd started to insure slave ships and slaves in them.

These first policies of its kind are notable for several reasons. First of all, this small attempt turned into a giant insurance and re-insurance market today in the name of Lloyd’s of London. Secondly, Lloyd defined the risk insured properly by separating the slave death due to “perils of the sea” (insured) and “natural death” (not insured). Also, these insurance policies managed to turn into a modern insurance industry as the practice was followed by many others that resulted in a proper market.

Today’s Insurance Market

Today we have a very active and innovative insurance industry with hundreds of solid participants. You can insure almost anything from a footballer’s feet to an actress’ bum. You can buy individual policies for cars, homes, boats and your gadgets or you can have umbrella policies. If you are looking for a policy on auto insurance in the US you can check http://cheapautoinsurance.net to compare your options. Whatever you do you shouldn’t buy a policy without shopping around for the best deals as the prices can vary significantly.

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