| 18th Century History |
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Articles and Products of History The History of InsuranceInsurance is a method of moving the risk to others, usually an insurance company with deep pockets and is done by "averaging" the cost among many. This "spreads the risk" and allows a premium of hundreds of dollars to rebuild a house worth hundreds of thousands. There are examples of insurance being used as far back as more than 1000 years B.C. mentioned in the Babylonian Code of Hammurabi. The earliest forms of insurance involved the risk to merchants for loss of shipments. This was a common practice made famous in the west by Lloyds of London which originally insured ships and shipments. Interestingly, Lloyds is not strictly an insurance company but a group of individuals who put up their assets. Life insurance has its origins in the sense of community. Just like anyone would help care for a neighbor's children, as you see when a breadwinner dies and a collection is taken up, life insurance is designed to help take care of families in need when the income of the breadwinner is lost. All that a life insurance company does is allow for the "collection" to be done in advance and to be a central source for the "neighborhood" taking in the money, investing it wisely and sending it to those in their moment of need. This can be done because of the "law of large numbers" and the effect of averaging. Good mathematics and record keeping can track how often certain events occur. You don't know to whom something will happen or when, but by averaging one can take care of the few by the smaller contributions of the many. The ancient Greeks had something called benevolent societies which were a type of life insurance and disability insurance or health insurance. In the early middle ages, guilds helped families after the death of a guild member. As time went on and commerce became more broad in kinds of goods and services, more categories of insurance were developed. In the 17th century in London the first fire insurance company which is the predecessor of what we call homeowners insurance was started. Not too long after this, the first United States insurance company was started in Charleston, South Carolina. Insurance was made more popular when Benjamin Franklin started an insurance company in Philadelphia a few years later. That company insured houses in case of fire. Franklin, as always, was an innovator and he began the practice of fire prevention methods through warnings of fire hazards. Life insurance and most non-commercial insurance has its roots in the innate and good sense of caring for others. In fact most life insurance companies started as mutual life insurance companies. A mutual insurance company is one that is owned by the policyholders. This is a unique business model. Profits are distributed by the company to the owners of the company who are also the customers. There are no stockholders to distribute profits to. Thus excess funds are given as dividends or held as surplus reserves to maintain a cushion in case of excessive claims. Also, there were and are also fraternal societies that have the mission to help each others' families in times of need. These fraternal societies act similar to a mutual life insurance company. The growth in the use of the internet has also affected the insurance business. There are sites that educate on the subject of life insurance such as Lifeinsure.com which also has an insurance glossary and allows for instant quotes on term life insurance. It also describes and gives quotes for another variety of term life insurance called return of premium life insurance where one gets their term premiums refunded if they keep their policy to end of the term of 15, 20 or 30 years. There also are sites for disability insurance such as www.protectyourincome.com which goes over the types of disability insurance and has the facility to provide disability insurance quotes. There are also sites for car insurance, homeowners insurance and even liability insurance and business insurance such as businessinsurancenow.com. With sites like www.lifeinsure.com now on the internet, the consumer's position has evolved from seeing one agent who represented one company to the place where without seeing an insurance agent, one can get quotes, get educated, clear up the terminology of the subject and then decide yes I would like to get this - or not. This does not mean that there is not still a place for an informed an educated agent. Even a web site has to have licensed insurance agents to answer questions and take applications for insurance. Further Reading
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