Just how old is insurance?

Historians believe that a rudimentary form of insurance may have existed as early as 5000BC in China--boat operators separated their cargo into several boats so that if one boat was lost, the entire cargo would not be lost (all the boat owners shared the loss)

The principle of indemnity

The Code of Hammurabi, written around 2000BC by the Babylonian emperor, said that the merchant who borrowed money to finance a trip and was subsequently robbed would be relieved of his debt.  The risk was transferred to the money lender.

The first commercial insurance company

In the early 1300s, the first company was chartered by the Duke of Flanders in England and sold policies insuring cargo against perils of transportation by land and sea

When did insurance brokers begin?

It is said that the function of an insurance broker (and agent) began in the late 16th century in Portugal when the King declared that there should be persons who would watch over the security of their clients and receive a % of the premium as their costs

Lloyd's of London

Marine insurance became increasingly important as world travel increased with the development of the American colonies in the late 17th and early 18th centuries.  Lloyd's is not a company but an insurance market--formed by a collection of coffeehouse gatherers who gambled on whether ships would sink or return to port with a profitable cargo

Development of Property & Casualty Insurance in the United States

While still part of the motherland, property/casualty insurance began in what is now the United States actually as "fire brigades" or sometimes called a "protection racket".  Policyholders paid private fire brigades not to stand around and watch their buildings burn

So where does Ben Franklin fit in?

One of the first American fire brigades was started by Ben Franklin in Philadelphia in 1752.  It evolved into what was later known as Reliance Group Holdings (a multi line insurance company)

What about Life Insurance?

Life and health insurance was based on medieval English friendly societies, in which workers banded together to contribute to members' funerals.  Later, contributions were formalized to become premiums.  For example, the Prudential Ins Co began as a friendly society, later taking its name from an English Company

Today

There are over 2000 property and casualty and 2000 life and health insurance companies in the United States.  

WHAT ARE THE PRINCIPLES OF INSURANCE?

1.

The premiums of many policy holders who do not suffer losses under the policy, reimburse the policy holders who do have covered losses

2.

The benefit is "peace of mind" in property & casualty and some life and health insurance.  You don't cash in the policy and get a refund (the only exception is forms of cash value life insurance such as whole or universal life where you may be able to "cash in" the policy.

3.

Premiums within reasonable limits, reflect the degree of risk for covered losses of that policy

Insurance is designed to stabilize the life or business of the policyholder by allowing them to engage in many ventures without having to set aside enough money to meet financial requirements that could arise from a future loss.