Insurance Through the Ages

From watching one another’s back to seeking cover from cyberattacks, the history of insurance can be traced back thousands of years.

The concept has evolved drastically over time, but the history of insurance can be traced back thousands of years. For early humans, risk management took the form of safety in numbers – living and hunting in groups to spread out the risk posed by predators and starvation. Later, community members helped one another rebuild shelter in times of loss and stored surplus food to safeguard against famine. Today, insurance covers just about everything, including space satellites and the threat of cyberattacks.

“No financial transaction could happen without insurance,” says Thom Rickert, vice president and emerging risk specialist. “Who would take the risk of moving cargo from here to there without some assurance that they would not face financial ruin if the cargo was lost? Who would loan money on a home or business? The concept of risk sharing has been around for millennia. It’s the reason insurance exists.”

Insurance started on the seas

All sorts of insurance coverage are available today, but marine insurance is broadly acknowledged as the earliest known form. As early as 5,000 years ago, Chinese merchants were hedging against shipping losses by spreading cargo among multiple ships. Babylonian ship merchants took out loans on shipments and paid a “loan forgiveness” fee to lenders in case of loss or theft at sea. This form of insurance law was recorded in the Code of Hammurabi, a list of several hundred laws promulgated by the Babylonian ruler of the same name during his reign from 1792 B.C. to 1750 B.C.

The Code of Hammurabi is a set of laws established by Babylonian king Hammurabi shortly before the end of his reign in 1750 B.C. The text is carved into a four-ton slab of diorite.

The concept of sacrificing a portion of a shipment in order to save the majority of cargo or human life took root in Rhodes in the first century B.C. This idea forms the basis of the law of general average still in use today, which compels merchants to split up the financial loss of dumped cargo to protect the greater whole. Marine insurance found its center at Lloyd’s of London, the global insurance marketplace that began in Edward Lloyd’s London coffee shop in 1688. Lloyd’s became the go-to spot for shipping news and marine insurance, and today its syndicates write specialty insurance policies around the world on a staggering range of risk.

Insurance and the Great Fire of London

Fires were a constant threat in 17th-century England, but the Great Fire of London in 1666 was so devastating it kindled the birth of organized insurance. The fire began in a bakery on Pudding Street and destroyed more than 13,000 houses and dozens of churches over five days. In an effort to avoid similar devastation, Nicholas Barbon, a physician, economist and builder during the city’s reconstruction, developed the idea of fire insurance. He founded The Insurance Office, the world’s first insurance company. The company hired water brigades to fight fires in the buildings it insured, which were identified by company signs called “firemarks.” Other companies formed their own firefighting teams, before municipal firefighting services were organized.

The Great London Fire, 1666 – engraved in 1894 – depicts the fire that began in a London bakery on September 2, 1666 and burned for 5 days.

“An ounce of prevention”

In America, a firefighter’s helmet was among the many hats founding father Benjamin Franklin wore. Franklin’s famous line, “an ounce of prevention is worth a pound of cure,” referred to his call for firefighting preparedness. In 1736, Franklin established the Union Fire Company in Philadelphia, one of America’s first organized volunteer fire departments. Along with fellow firefighters, in 1752 Franklin organized the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Now the oldest successful property insurance company in the nation, the Philadelphia Contributionship followed practices then that are still in use today, such as inspecting properties as a condition of underwriting policies.

Insurance keeps pace with innovation

As new types of risk have emerged, insurance programs have followed.

The push to innovate in insurance continues today, as digitalization and the emergence of insurtech compel the industry to contemplate the future and what it might bring.

Learn more about the Great Risk-Takers of History.

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