A Brief History of Insurance

Kay McMillan
Jul 21, 2017 · 2 min read

Modern insurance can get a little involved, with products like business liability insurance, car insurance, life insurance, health insurance, and even travel and pet insurance being common in American households. You might think it’s all a new way to get money out of paranoid people, but the insurance industry has a long and interesting history, dating back as far as ancient times when people traveled in nomadic groups.

Insurance is, at its heart, a way to distribute risk among a population of people. Instead of one person alone bearing all the consequences of their misfortunes, a group of people agrees that each is in the same amount of risk, and they all invest a little bit into a communal fund that an individual can draw from if it’s needed.

In early nomadic cultures, the people of a tribe would share responsibility of one family’s shelter was destroyed or their provider fell ill.

Later, when humans began farming and building more permanent settlements, people built granaries to store food in case of famine. This was the community’s insurance against starvation.

Modern insurance, it might be argued, came into existence in the first millennium BC. Merchants in Rhodes created something that they called the General Average, which was an insurance payment when they shipped their goods together. If one of the merchant’s shipments was lost or jettisoned due to storms or sinkage, those insurance payments covered the cost.

Around 600 BC, the Greeks and Romans introduced early forms of health and life insurance, and in the Middle Ages, guilds and societies collected dues that served as insurance to cover member needs.

The first known insurance contract was written and signed in Genoa in 1347, and the first insurance book, On Insurance and Merchants’ Bets by Pedro de Santarem, was published in 1552, though it was actually written in 1488. Most of this early formalized insurance was a type of business insurance that covered merchants and traders against losses.

Since those early days, insurance went through a slow metamorphosis, including the introduction of property insurance in 1666 following the Great Fire of London, life insurance in the early 1700s, and accident insurance in the late 1800s.

Today, the types of insurance you can purchase are almost endless, but the basic principle is still the same — a community of people pitches in a little each, because odds are, one of them is going to need it one day.

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Kay is a full-time professional blogger and digital marketer in Las Vegas.

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