The Origins of Insurance
Insurance, in essence, is the payment of money in return for another party assuming all or part of the risk of a loss.
Insurance involves risk assessment and risk management. Basic principles of these were practiced by the Chinese and Babylonians thousands of years ago when it was necessary to transport goods in boats. Conveyance of wares across seas and along rivers has endured throughout the centuries. Over time methods for assessing risk and the rate to be charged for its assumption became more sophisticated, and maritime insurance came to the fore. The first recorded contract of insurance was in 1347, in Genoa, Italy for a marine venture.
Marine insurance was the main market for several hundred years. Property insurance became popular following the Great Fire of London in 1666 when over 13,000 homes were destroyed. Fire remained the greatest risk but, in those days, there was no government-run firefighting service so the Insurers established their own teams of firefighters who would respond on foot and sometimes with a horse-drawn appliance. The fire-fighters would only attempt to extinguish a fire at a property that they knew to be insured by the company/society that had enlisted them. Insured buildings were identified by a small metal plaque attached to the outside wall bearing the logo of the particular company from whom insurance had been purchased. These ‘fire marks’ became collectors’ items centuries later; there is an impressive display of fire marks housed at the premises of the Chartered Insurance Institute in London.
In the 17th century London was an important centre of trade. In 1688 Edward Lloyd opened a coffee house in the city as a meeting place for businessmen in the shipping industry wishing to insure cargoes and vessels, and individuals willing to underwrite such ventures in return for payment of an agreed premium. This was the origin of the famous Lloyd’s of London. Lloyd’s is different to the general market in that it is not an insurance company but a group of ‘members’ who form syndicates to transact insurance.
The Greeks and Romans established ‘benevolent societies’ which, upon the death of a member, cared for the surviving families and paid funeral expenses. The concept was followed by ‘guilds’ in the Middle Ages and ‘friendly societies’ of the Victorian era. The first life assurance policies, which paid an agreed amount to a stated beneficiary on the death of named person, appeared in the early 1800s.
“Accident insurance” evolved in the middle of the 19th century as the railway system developed. There were a significant number of injuries and fatalities in incidents involving the new locomotives and the insurance provided payment for death or disability.
As the world has progressed, with advances in science and technology, types of insurance have expanded to meet the changing needs of society: motor, aviation, liability, credit, income protection; insurance for individuals and for major corporations and markets. From the familiar, like travel and pet insurance, to the one-offs such as insuring a musician’s hands, insurance can be arranged once the premium has been assessed to reflect the degree of risk carried.
One always hopes that a claim against the insurance policy will not arise. While some may consider the payment of their premium to have been wasted if they are fortunate not to suffer a loss, they overlook that it brings peace of mind; that in return for paying a known and relatively small sum, they are covered in the event of a serious loss which otherwise could be financially crippling.
The author’s UK profession was insurance, specializing in claims. She was a Fellow of the Chartered Insurance Institute, a Fellow of the Chartered Institute of Loss Adjusters and a European Loss Adjusting Expert. She served as a President of the Chartered Insurance Institute of Croydon and as a CII tutor for students including those in the Caribbean on correspondence courses.
A fire mark of the Hand in Hand Fire & Life Insurance