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A brief history of insurance

Have you ever wondered how the insurance industry came about? Next time a policy renewal notice pings into your inbox and it’s again time to compare insurance quotes, why not settle down with a cuppa and delve into our brief history of insurance before you get started - it’s more fascinating than you might realise!

Early shipping insurance

One of the earliest forms of insurance dates all the way back to 4,000-3,000 years BC and the Babylonian merchants shipping their goods around the globe. They took out ‘bottomry’ contracts, a marine insurance in which the merchant obtained a loan to fund the ship’s voyage; if the ship sank or the cargo was lost, the loan didn’t have to be repaid. The interest they paid on the loan covered the risk. Bottomry was recognised in ancient Roman law and became a highly developed industry from the 15th century as world trade opened up further.

Rome was also at the centre of a very early version of life insurance! One reason customers might take out life insurance today is to meet funeral expenses following their death. The Romans operated prototype funeral plans, with members paying monthly subs into a fund which would then cover the cost of their burial!

Coffee shop contracts

By the mid-1600s, London was a bustling hub of global trade, with merchants, bankers and underwriters gathering in coffee shops to arrange ship and cargo insurance - as well as to gamble and gossip! The term ‘underwriter’ comes from their contracts, with the insurer signing his name underneath the wording of the document. Edward Lloyd became one of the most successful marine insurers, with Lloyds of London remaining an industry world leader more than 300 years on!

While the London underwriters analysed risk and weighed up the price accordingly, a friendlier form of mutual assurance was developing in the Alps. The farmers there would agree to look after each other if livestock or a child became ill, in what was perhaps a fledgling kind of health insurance! It’s no coincidence that some of the world’s largest insurance companies are based in cities such as Zurich and Munich, as the farmers took their ideas with them when they started to move from the mountains to urban areas.

Life assurance

Soon insurance was available for other eventualities, particularly fire risk following the Great Fire of London in 1666. Many fraudulent firms and get-rich-quick schemes sprang up but, in 1720, two were founded by Royal Charter - the Royal Exchange Assurance Corporation and the London Assurance Corporation. Initially both specialised in marine insurance, but soon became the first composite insurance companies by also offering fire insurance and life assurance.

In America, founding father Benjamin Franklin established the first insurance company, The Philadelphia Contributionship, in 1752. Initially offering fire insurance to the town’s 15,000 inhabitants, the company is now a mutual holding specialising in home insurance.

Today, we can insure just about everything! So next time you’re comparing quotes - for anything from home and car insurance to the peace-of-mind policies that can safeguard your finances and protect your loved ones should anything happen to you - you might find you have more in common with the Mesopotamian traders than you thought!

ActiveQuote.com is the UK’s leading insurance comparison website and broker of health and protection cover, specialising in health insurance, life insurance and income protection. Based in Cardiff Bay, we deliver suitable policies at the best available prices.