History of Insurance

Insurance is basically a risk management strategy to safeguard oneself from potential financial loss due to an unforeseen incident. Insurance is defined as equitable transfer of risk of a potential loss, from one entity to another, in exchange of a reasonable fee. The history of this risk distribution and transfer goes back to the times of Babylonians. Babylonian traders developed a system in the 2 nd millennium BCE. It is recorded in the Hammurabi Code, c 1750 BC and was actively practiced by the Mediterranean sailing merchants. In those days if a trader took loan from the lender he used to pay a fee to the lender in lieu of giving him a protection against the situation when the shipment gets stolen then the loan is cancelled.

Insurance

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Guilds and the Talmud

The health and life insurance were in a way discovered by the Greeks and Romans. They have organized groups called guilds in c. 600 AD. The Benevolent societies took care of families and funeral expenses of members when they died. The guilds in the middle ages served the purpose of meeting ground for insurance. The Talmud had a similar function.

Inhabitants of Rhodes introduced general average for those merchants who sent their goods, grouped with other traders. They paid a proportional amount as divided premium, which was used for reimbursement in case any or all of them suffered from shipment loss due to nature’s havoc. However, the formal type of insurance as we see it today, found origin not before the post renaissance period during the seventeenth century.

Lloyds of London

Mr. Edward Lloyd started Lloyds of London as a coffee house in the late 1680s. It soon emerged as a buzzing hub of people interested in getting their cargoes and ships insured. A lot of mariners, traders, ship owners and merchants frequented Lloyds. Thus it soon rose up as the largest market for specialized insurance especially that of marine insurance. It still holds up this position. However, general insurance can trace its origin to the great fire of London. After the fire Nicholas Barbon started insuring buildings US saw its first fire insurance in Charleston, South Carolina, in 1732. In 1752, Benjamin Franklin’s company, Philadelphia Contributorship professed the idea of fire insurance in full swing. In the 19 th century, government introduced regulation of insurance and in the 20 th century highly specified insurance rose. It is predicted in future the ability of science to predict the onset of natural catastrophe will affect the way insurance is seen today.

Sergio, the author of this post, writes about insurance topics, such as car insurance quotes for the UK market.

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