The History Of Insurance

By Author: Mike Smith
Total Articles: 5
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The concept of insurance is increasingly gaining popularity even in India, though instead of being seen as a protection shield, its being seen as an investment. Insurance can be considered as a promise of reimbursement for specific potential future losses for a periodic payment between the insurer and the insured.

How important is insurance really? An insurance product is designed such as to protect the life and/or the property of an individual, company or other entity from losses under unforeseen circumstances.

It would not be incorrect to say that the concept of insurance is as old as that of human societies. In the ancient times, if an individual's house burned down, the other members of the community helped build a new one by contributing the necessary resources.

In as early as 3rd and 2nd millennia BC, the Chinese and the Babylonian traders' practiced methods of risk transfer. The Chinese were known to redistribute their wares across many vessels to limit the loss due if a ship sunk when traveling through treacherous river rapids.

Insurance was practiced by Babylonians in form of a system, the ...
... famous Code of Hammurabi, c. 1750 BC and the by early Mediterranean sailing merchants. If a merchant took a loan to fund his shipment, he would also pay the lender an extra sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen.

The concept of insurance was also popular among the Iranian Achaemenian monarchs of Iran who were pioneers in insuring their people. They went an extra step by registering the insuring process in governmental notary offices. Insurance was almost ceremonial and was performed each year in Norouz (beginning of the Iranian New Year). The heads of different ethnic groups, as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices.

People in Rhodes came up with the concept of the 'general average'. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were jettisoned during storm or sinkage.

Life insurance and health insurance have been around since 600 AD when the Greeks and Romans who organized guilds called "benevolent societies" that took care of families and paid funeral expenses of members upon death. In the late 17th century England, "friendly societies" existed where people donated funds to be used for emergencies. This was much before the concept of insurance was formally brought in place.

It was in 14th century in Genoa that came up the concept of separate insurance contracts which were not bundled with loans. The insurance pools were backed by mortgage of property.

The end of the 17th century, the concept of marine insurance existed in a concrete form.

The modern day concept of insurance has its origin in the Great Fire of London, 1666 which destroyed 13,200 houses. This lead to the establishment of England's first fire insurance company, "The Fire Office," to insure brick and frame homes by Nicholas Barbon in 1680.

The first Insurance Company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin popularized the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he established the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Insurance has come a long way today

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