The History of Insurance- Looking Back

Looking back centuries ago...

It is difficult to pin point the exact beginning of insurance. Insurance has existed in many different forms for thousands of years. The most ancient form of insurance (still in existence in some rural areas today) existed in non-financial economies in the form of people helping other people. For example, if one neighbor’s house burns down, the rest of the neighbors would come together to rebuild a new home. In this type of community, your premium is paid by lending a helping hand- securing your ability to get help if you are to need it in the future. Ancient societies lived on this type of insurance for hundreds of years and it continues to exist in economies where financial instruments are not widespread.

However, the type of insurance we most often are referring to in the modern world however is based on a money economy. The roots of modern insurance can be traced back as early as 2100 BC when Chinese and Babylonian traders moved their goods via caravan and by sea. Traders would pay an extra fee to their lender for the lender’s promise to cancel the loan should the goods be stolen or destroyed in a capsize.

Thousands of years later the inhabitants of Rhodes (A Greek Island), invented and put into use the concept of ‘general average’. Merchants who were shipping their goods would all pay into a joint premium which would be used to reimburse any merchant who lost their goods due to a storm or ship sinking.

In 600 AD, the Greeks and Romans invented the beginnings of health and life insurance. “Benevolent Societies” were formed which helped financially care for families and cover funeral expenses upon the death or serious illness of a society member. A similar type of insurance existed later on in England and was based on the membership to “Friendly Societies”, in which members donated funds of money to a joint sum of money that would be disbursed and used when a member experienced a “covered loss”.

Near the end of the 17th century, London became the hub for marine trade and the high demand for marine insurance became glaringly apparent. In 1688, Mr. Edward Lloyd opened a modest coffee house in London. Little did he know that his meek beginnings in the coffee business would grow to be something entirely different. Becoming a popular meeting spot for ship owners, merchants, captains and those wishing to insure ships, Lloyd’s Coffee House soon became known as the place to go for marine insurance. Appropriately, in 1771 Lloyd’s Coffee House ceased the sale of coffee and became Lloyd’s Subscription Room where 79 underwriters and brokers started the First Committee of Lloyd’s. Today, Lloyd’s is the leading specialty insurance company with 300 years of experience insuring some of the most complex risks including oil rigs, airlines, celebrity body parts and the Olympic games.

London can also be attributed as the birthplace of building insurance where, in 1666 the Great Fire of London took 13,200 home and businesses and 87 churches. You’ve likely heard of this famous fire in the childhood song, “The London Bridge is Burning Down”. In the months after this disaster, Nicholas Barbon opened an office to insurance buildings in London. His company became known as “The Fire Office” where in 1680 where he insured brick and frame homes.

In 1732, the first United States fire insurance company started in Charles Town (modern day Charleston), South Carolina. Benjamin Franklin helped to enforce the practice of insurance and in 1752 founded the “Philadelphia Contributionship for the Insurance of Houses from Loss of Fire”. This company was the first company to move towards fire prevention by warning of fire hazards, promoting fire safety and by refusing to insure wooden houses and other high-risk buildings.

In modern day, insurance companies exist all over the United States providing protection from financial losses from all sorts of perils and disasters. Travelers Companies, trusted partner of HomeInsurance.com, is known for writing the first auto insurance policy in 1897. With over 150 years in the insurance business, Travelers has become a trusted source for insurance in the United States.

Currently in the United States, regulation of the insurance industry is handled at the state level, by individual state insurance departments. State insurance commissioners mostly operate individually based on their state’s insurance needs but have also been known to work in joint efforts through a National Association of Insurance Commissioners.

With insurance rates steadily increasing in recent years since September 11, Hurricane Katrina, and other disasters, it becomes more important for the insured to find dependable coverage and optimal insurance rates. Insurance shopping companies such as HomeInsurance.com, have come to the forefront of insurance shopping by offering property owners multiple, competitive quotes. Giving homeowners an edge in the quoting process, home insurance shopping companies level the playing field and give property owners a powerful stance in the insurance industry.

For more information about modern day home insurance, visit Home Insurance 101 to get an insider’s look at a modern, standard home insurance policy with explanations of industry terms and jargon.

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