Ancient Beginnings
Picture this: Babylon, 1750 B.C.E. Here, in the Code of Hammurabi, we find one of the earliest glimpses of insurance. Carved on ancient stone, the code stated that if a broker lost or damaged their client’s assets, they’d have to pay, unless it was an ‘Act of God’—something unavoidable like a massive storm or hurricane.
The ancient Greeks, around 1000 B.C., took things a step further with a concept called “general averages.” This maritime law idea meant that if a ship lost its cargo, all the merchants who had items on that ship shared the loss. They chipped in a bit upfront, kind of like an insurance premium. This concept still shapes modern insurance practices.
Medieval Guilds
Fast forward to the Middle Ages, where guilds ruled the scene. These guilds weren’t just about protecting tradespeople’s interests; they offered insurance too. Say a blacksmith’s shop burned down; the guild helped cover the loss. If a stonemason got hurt or passed away, the guild supported their family. These insurance policies boosted trade and city growth.
The Great Fire of London
Let’s zoom in to the year 1666—the year of the Great Fire of London. It started at a bakery and quickly engulfed the city’s mostly timber-framed buildings. This disaster made two things clear: London needed a professional fire service, and homeowners and business owners needed insurance. Thus, fire insurance companies sprouted up. They not only insured buildings but also operated fire services.
The Birth of Lloyd’s of London
Now, we’re in 1688: London. Edward Lloyd’s coffee shop was a hotspot for shipping merchants. Lloyd used their trade information to create Lloyd’s List, a publication of shipping news. Merchants used this as a great place to buy maritime insurance. In 1871, the Lloyd’s Act gave Lloyd’s underwriting abilities. Still today, Lloyd’s operates as a society where individuals and businesses collectively underwrite policies and remains the oldest insurance carrier in the world.
Victorian Life Insurance
In the early 1800s, wealthy Brits became obsessed with their own mortality, giving life insurance a boost. Middle-class folks followed suit, using life insurance for security. It helped entrepreneurs secure business loans during the industrial revolution. By 1850, around 180 insurers provided £150 million of life insurance in the UK. Unfortunately, some firms went bankrupt due to fraud, leading to the first government regulations in the insurance sector. Famously, H.H. Holmes, a Victorian era serial killer, stole bodies as a medical student to make false insurance claims and even murdered his friend for his insurance payout. No wonder they were quick to add regulations!
Composite Insurance Policies
Regulations helped, not hindered, the British insurance industry, encouraging insurance firms to grow into large businesses. This led to composite insurance policies. Before, companies focused on a single type of insurance. Now, various policies could be combined into one catch-all policy. For instance, home insurance combined fire and theft coverage.
Swiss Re and Reinsurance
Switzerland, 1861. Swiss Re was born after the Glarus fire, showing the need for insurance covering low-risk but high-cost events. They pioneered ‘reinsurance,’ where an insurer shares their risk with other companies. This allowed them to offer a wide range of insurance, from marine insurance to health insurance.
The Rise of Health Insurance
Ancient people had some form of accident insurance, but it was limited to injuries that rendered a person unable to work. Modern health insurance emerged in 1929 with Blue Cross in Dallas. Clients paid 50 cents per month for maternity treatment. As medical technology advanced in the 20th century, countries like the UK established nationalized healthcare systems, while others, like the USA, created competitive health insurance sectors tied to company income. It’s incredible to see how the history of insurance has evolved from its ancient origins into the complex systems we have today.
Read about why honesty matters in the world of insurance, here.
When should you consider errors and omissions coverage?
