The roots of insurance go way back to Babylonia, where traders were encouraged to assume the risks of the caravan trade with funds to be paid only after the goods had arrived safely. The Phoenicians and the Greeks soon hopped onto that bandwagon and utilized a similar system for their seaborne commerce. The Romans were innovative as well and used “burial clubs” as a form of life insurance, by providing funeral expenses for members and later making payments to their survivors.
As towns grew and trade spurted up around Europe, many medieval guilds undertook measures to protect their members from loss by fire and shipwreck, or provide ransom from captivity by pirates, and to provide decent burial and support in times of sickness and poverty. The earliest known insurance contract was in Genoa, Italy in 1347 and soon marine insurance became practically universal among the maritime nations of Europe.
We’ve all heard of Lloyds of London insurance and laughed over some of the outrageous policies for insured through the years. Well, in 1688, Lloyd’s Coffee House was a hopping place where merchants, ship owners, and underwriters met to transact business. By the end of the 18th century, Lloyd’s had progressed into one of the first modern insurance companies. In 1693 the astronomer Edmond Halley had constructed the first mortality table, based on the statistical laws of mortality and compound interest. In 1756, Joseph Dodson improved and even corrected Mr. Halley’s mortality table and made it possible to scale the premium rate to age (previously the rate had been equal for all ages).
The insurance agency grew in leaps and bounds with the growth of British commerce in the 17th and 18th centuries. Before forming companies that dealt exclusively with insurance, policies were signed by a number of individuals, each of whom wrote his name and attested to the amount of risk he was assuming underneath the insurance proposal – this is how the term “underwriter” first appeared. The first stock companies to engage in insurance were chartered in England in 1720.
In America, it took until 1735 before the first insurance company in the American colonies was founded at Charleston, South Carolina. Fire insurance corporations were formed in New York City in the year 1787 and Philadelphia in 1794. The Presbyterian Synod of Philadelphia sponsored the first life insurance corporation in America, exclusively for the benefit of Presbyterian ministers and their dependents.
In the 1830s the practice of classifying risks was begun and after 1840, with the decline of religious prejudice against the practice, life insurance entered a boom period.
The realization that adequate reserves must be met to meet unexpectedly large losses was as a result of the New York fire of 1835 and shortly thereafter, in the year 1837, Massachusetts was the first state to require companies by law to maintain such reserves. The great Chicago fire of 1871 only emphasized the costly nature of fires in structurally dense modern cities.
Public liability insurance, rallied forth by legislation, made its appearance in the 1880s, fostered in part with the advent of the automobile.
Slowly, other areas of insurance to compensate losses were instituted. For example the Workmen’s Compensation Act of 1897 in Britain required employers to insure their employees against industrial accidents and this idea eventually caught on the United States thankfully for all the workers who are hurt in accidents.
By the arrival of the 19th century, there were a multitude of benefit societies that were founded to insure the life and health of their members, and, many fraternal orders were created to provide low-cost, members-only insurance; some of those fraternal orders continue to exist and provide insurance coverage for their members, much the same as most labor organizations.
Today, while most employers sponsor group insurance policies like life insurance, disability insurance, sickness and accident benefits and pension plans, most employees only are asked to help contribute a minimal amount toward their health insurance premium.
After 1944, supervision and regulation of insurance companies (a task previously the sole responsibility of the states) became subject to regulation by Congress under the interstate commerce clause of the U.S. Constitution. Up to the 1950s, most insurance companies in the United States were restricted to providing only one type of insurance, but then legislation was passed to permit the underwriting of various fire and casualty companies that allowed them to underwrite several classes of insurance.
Insurance firms have become larger as a result of mergers and acquisitions and now companies service a wide variety of types of insurance. As to rules and regs, they have been tweaked since the earliest insurance company appeared on the scene – one of the modifications was in 1999; this is when Congress repealed banking laws that had prohibited commercial banks from being in the insurance business, a significant measure that was expected to result in expansion by major banks into the insurance arena.
The larger and more complex insurance companies have become, so has the cost for insurance premiums. Many people “went bare” or were uninsured, especially as to healthcare insurance due to the exorbitant fee, but those days are gone since ObamaCare was instituted. But some people, who cannot take advantage of government subsidies through The Affordable Care Act to lower the cost of healthcare, just have to pay the fine for “going bare. The acts of God that causes most of our nature disasters like catastrophic earthquakes, hurricanes, and wildfires in the late 1980s and the 90s have also put a large strain pm many modern insurance company’s reserves.
The insurance business is a lucrative one – sadly, America’s residents will always need their basic insurance protection to get through every stage of their life.