Insurance Awareness Day
As the old adage goes, nothing in this life can be certain except death and taxes. Well you could quite reasonably add insurance to that well-known saying as well because for the last few millennia, the world’s most common form of risk management has played an essential role in our daily lives.
A Brief History of Insurance
And given that Insurance Awareness Day looms large, we thought we’d give you a brief history.
Risk management originates from ancient civilizations such as the Babylonians who sought to transfer or redistribute the ‘risks’ involved in their commercial activities to limit any loss they might incur. They came up with a system whereby if one of their sailing merchants received a loan to fund a shipment, he would pay the lender a fee in return for a guarantee that the loan would be cancelled should the shipment be lost at sea.
The Greeks took things a step further a few thousand years later with their ‘general average’ concept. Basically this system permitted groups of merchants to pay to insure their wares when shipped together. The premiums that had been collected could then be used to compensate those unfortunates whose goods had been lost during transit.
To make things more, shall we say, ‘concrete’, the Italians came up with insurance contracts in the middle of the 14th
century. Once again, these related to maritime commerce and for the first time permitted contracts to be considered separate from investment. In addition, premiums started to vary according to the extent of the risk.
The Enlightenment period had a huge influence on society as we know it today, with major advances in scientific, societal and philosophical thinking – and so it goes with insurance. Risk management became far more sophisticated as more specialised types began to emerge. For example, following the Great Fire of London in 1666, property insurance became an urgent requirement for Londoners. Unsurprisingly, the first fire insurance was also established as panicked city folk sought to protect themselves against any further conflagrations.
It was also during this period that the underwriting of businesses became a more common practice. This became extremely important towards the turn of the 17th
century, as London grew as a center for global trade. And because most major trading was done by sea, marine insurance was in huge demand. To meet this demand, a gentleman by the name of Edward Lloyd opened a small coffee house in London where members of the shipping industry could come to meet those willing to underwrite their ships and cargoes. This eventually led to the establishment of Lloyds of London.
Insurance continued to evolve with the advent of life insurance policies in the early 18th
century as well the introduction of accident insurance some 100 years later. The latter policies were introduced as a result of rising railway fatalities. And the National Insurance Act of 1911 for the first time gave British people the very first system of insurance against sickness and unemployment and paved the way for modern motor insurance
as we now know it.