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Insurance During The Ancient and Medieval Era
Insurance, in some form dates back to prehistory. Initially, people sold goods in their own village or gathering places and slowly started selling in nearby villages. In non monetary economies (economies with no standardized and set financial instruments), the risk was mitigated through mutual risk agreements. The risk was distributed through Guilds, Co-operative societies and proto-states-institutions to provide protection and encouraged mutual survival in adverse circumstances. The payoff for losses did not involve any financial transaction. For example, if someone's house burnt down or was destroyed, the neighbors committed to rebuild it. Public Granaries (a storehouse built above ground to protect grain or animal food against mice) is another example of ancient Insurance to indemnify against famines. During the 2nd and 3rd Millennia BC, the Chinese, Indian and Babylonian merchants practiced the transfer of Risk in a monetary Economy (with markets, currency, financial instruments) by various methods. The Chinese, for example distributed the loss to a single vessel of a shipment by distributing it over the merchandise in multiple vessels of a shipment. The Babylonians practiced a system recorded in the famous Code of Hammurabi, where if a merchant received a loan and the cargo was destroyed or stolen during transportation, the loan would be written off by the lender. The Rhodean Sea Law, in reference to merchants and seafarers, includes that a seafarer would be reimbursed by his collegues if the shipment was thrown into the sea to save the vessel. During Medieval Era, credit and Insurance were provided at the same time to a traveling merchant before the emergence of traditional maritime Insurance. The merchant would be liable to pay it back if the ship returned safely. Merchants paid a higher Interest Rate instead of sharing the profit for the shipment. Interest rate was based upon the risk involved with higher Interest rate for sea shipments compared to ground shipments.
Emergence of the Modern Insurance Concepts
A number of fires in Hamburg during the 17th century, and the Great Fire of London in 1666, contributed to a search for a more comprehensive solution that would distribute the costs among a larger number of people. Historically, people were unaware of the dangers of fire as they are today. Timber structures, low standard construction material and lack of understanding of the dangers of fire made the building vulnerable to fires. There was no Organized Fire Brigade with little to no skill of Fire Fighting.
1666-
On September 2nd, 1666, a fire started in a Baker's shop in London on Pudding Lane belonging to Thomas Farynor (Farriner). The fire spread rapidly and destroyed the entire city of London. The Great Fire of London completely destroys close to 13200 homes and 87 churches including the St. Paul Cathedral, Guildhall and the Royal Exchange.
1667-
From a matter of convenience to urgency, Sir Christopher Wren designates a place for "The Office of Insurance" in his new plan for London after the Great Fire of London.
1676-
On November 30th, 1676, The General-Feuer-Cassa, later named Hamburger Feuercasse is established as the first Fire Insurance Company in Berlin. All the private contracts of existing and new towns were combined in this Insurance company under public law. A number of other localized Fire Insurance companies started emerging. In 1765, Assecuranz-Compagnie für See-Risico und Feuers-Schaden emerged as the first ever Stock Insurance company and stayed in existence till 1815.
1680-
London's growing popularity as a center for Trade and Business was growing with an increased demand for Maritime Insurance. Edward Lloyd opens a coffee shop on Tower Street in London. Lloyd's clients are mostly merchants, ship owners and ship captains making it a source of the latest shipping news including loss of cargo, ship sinking etc. The coffee shop became a place of business for the Insurers and the Prospective Insurers for Cargo Insurance. The informal set up later becomes "Lloyd's of London" to include several related shipping and Insurance businesses.
1681-
After the The Great Fire of London, a man named Nicholas Barbon, an Economist along with his eleven associates start a Building Insurance Business and later introduce the City's first Property Insurance Company in the name of "Insurance Office for Houses".
1693-
The First Life Table for Life Insurance is written by Edmund Halley, however it lacks the necessary mathematical and statistical tools.
1696-
Many companies emerge as Fire prevention and Safety companies, displaying signs on Insured Homes doors and providing firefighting services. One company "Hand in Hand Fire and Life Insurance Society", structured as a Mutual Society stayed in existence for 135 years while running its own Fire Department. It played a vital role in designing the modern fire fighting system and mechanism.
1706-
The first life Insurance company named "Amicable Society for a Perpetual Assurance Office" is established in London by William Talbot and Sir Thomas Allen.
1710-
The Sun Fire Office, an Insurance company in England, that still exists today, was established.
1719-
London Assurance Act of 1719 is passed.
1720-
Royal Exchange Assurance Corporation receives its Royal Charter under the London Assurance Act of 1719. The Act establishes the corporation as the exclusive corporate insurer of marine property, however allows individuals in and outside of the Lloyd's consortium to underwrite insurance if they are unincorporated. The corporation is headed by multinational merchant, attorney, and author Nicolas Magens from 1741 to 1750.
1732-
The first Fire Insurance company emerges in Charlestown, South Carolina. Benjamin Franklin helps popularize Fire Insurance in Colonial America to help property owners minimize the risk to their properties. The Insurance Company starts issuing Insurance policies in the form of perpetual Insurance.
1750-
James Dodson, a Mathematician and Actuary, builds a mortality table and tool to correctly charge for life Insurance premiums in London. Due to his advanced age, he is denied admission to the Amicable Life Assurance Society. He is unsuccessful in his attempts to obtain a charter from the government till his death in 1757.
1752-
"The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire" is founded by Banjamin Franklin. The company warned against fire hazards and refused to Insure certain buildings due to high exposure. This laid the foundation of Modern Risk Management techniques and Underwriting in 1752.
1760's-
The "Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers" is founded by the Presbyterian synods in New York and Philadelphia. This marks the beginning of the Life Insurance in United States. The Episcopal church creates a comparable arrangement in 1769.
1762-
Edward Rowe Morris establishes the Society for Equitable Assurances on lives and Survivorship. The world's first mutual insurer lays the foundation of Aged Based Life Insurance Premium calculations taking into account the mortality rate. Mores introduces the term "Actuary" to the Insurance business specifying that the Chief Officer to be called an "Actuary". The term "Acturial Sciences" takes it origin from Morris.
1787-1837-
Dozens of Life Insurance companies emerge in the United States, however less than a few survive.
1848-
To insure against the rising number of fatalities on Railways, the "Railway Passengers Assurance Company" is formed in England. The Universal Casualty Compensation Company grants assurance on the lives of persons traveling by railway. Additionally, in case of an accident not resulting in fatality, compensation for injuries received under certain conditions.
1880-
An old age pension, accident insurance and medical care plan is introduced in Germany by Otto Von Bissmark forming the basis for Germany's welfare State. The program wins wide support of German Industry as it gives an Incentive to German Workers not to leave towards United States due to higher wages but the system lacks a welfare program.
1911-
The 1911 National Insurance Act is passed in England. It gives the British working class the first contributory system of insurance against illness and unemployment.
1933-
The Banking Act of 1933 in the United States further assisted in creating the Federal Deposit Insurance Corporation (FDIC) to Insure deposits and to protect consumers against bank default. In addition, FDIC allowed banks to continue to have a source of funds to make more home loans.
1934-
The National Housing Act is signed by President Franklin D Roosevelt on June 27th, 1934. The Federal Housing Administration (FHA) is created by the Act. The (FHA) is created to help the housing Industry recover from the Great Depression. Originally, FHA was not intended to fund loans but to provide mortgage insurance to banks to protect banks against losses incurred by home loans. As a result, FHA allowed lenders to commit more funds to home mortgage loans. Today, FHA is the largest insurer of mortgages in the world.
1935-
The Social Security Act is passed by Congress in the United States. The Federal Government mandates it to achieve the individual financial security that might not otherwise be available to its Nationals.
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