You will all appreciate that the subject of this talk is so wide so I will make a brief summary of some of the main salient points that personally strike me as important. For those listening who are not so well versed in insurance I hope that this will open your eyes to our industry and for my colleagues who have been practicing our profession for many years please consider it as an “ aide memoire “.
As our lives progress faster and faster and technology continues to improve there are so many things that we now take for granted and cannot do without; Insurance is one of these necessities. How did we ever survive without electricity, airline travel, cars, television, telephone, fax and Internet services to name but a few of what we consider our current daily necessities?
Insurance has come a long way but where did it’s role in society begin? We have to look back before we come to the present day and then to the future.
From earliest times society sought ways to soften the shocks of existence. Our ancestors quickly learned that no individual could go it alone. That only by pooling the resources of the many could the unfortunate few be helped.
This simple notion of mutuality persists like a welcome footpath through the tangle of human history. While empires have risen and collapsed, through wars, famines and pestilence, the concept of insurance lasted and even flourished.
Examples abound. Even as human society emerged from the darkness of unrecorded time, we can see it. In ancient Babylonia, where from the confluence of the Tigris and Euphrates rivers, enterprising merchants sent caravans and ships to trade with all parts of the known world principally with Egypt, Phoenicia, India and China.
To reduce the risk of robbery, plunder and capture for ransom, the Babylonians devised a system of contracts in which the supplier of capital for a venture agreed to cancel the loan if the trader was robbed of his goods. The trader who borrowed the capital paid an extra amount for this protection ( a premium ) in addition to the usual interest. As for the lender, collecting these premiums from many traders made it possible for him to absorb the losses of the few. This arrangement proved to be more appealing and sensible than the earlier one of pledging not only the trader’s ships and other tangible property, but also his life ( as a slave ) and those of his family as well. Accordingly, the practice was sensibly legalized in the Code of Hammurabi.
These arrangements became well known to the Phoenicians who traded extensively in Syria and Lebanon and to the Greeks, Hindus and Romans. In ancient Rhodes we discover a comprehensive code of sea laws, including a principle of “ jettison “ or “general average “.
The principle of sharing losses becomes more clearly defined as we trace the origins of life and health insurance in the ancient practices of Greece and Rome.
We see, for example, people joining together in burial societies that paid funeral costs out of monthly dues. Although these associations or guilds began as purely religious groups, they gradually became broader in scope as the benefits of the sharing principle became steadily more apparent. Health and burial insurance evolved extensively under a mutual plan without profit considerations in the Anglo-Saxon and German guilds of the middle ages. As successors to their Greek and Roman counterparts, the guilds combined the characteristics of trader associations, unions and fraternal societies.
To the Italian city republics of Venice, Pisa, Florence and Genoa, we can track the practice of insurance on a “ premium “ basis to about 1250 A.D. and in the Barcelona of 1435 A.D. we find the first comprehensive code of insurance laws. Our earliest record of true life insurance with “insurable interest“ dates back to 1430 in Genoa and, among other things, had to do with the lives of pregnant wives.
With the decline of medieval life and the guilds, so called “ friendly societies “ assumed the functions of mutual protection. Typically, these “ societies “ were made up of local groups of working people who made regular weekly or semiweekly contributions into a common fund administered by elected officers.
In 1666 the Great Fire of London finally and forcibly demonstrated the need for fire insurance. The primitive fire-fighting methods of the day were virtually helpless against the hungry flames which roared unchecked through narrow streets reducing timbered dwellings to ashes. The Great Fire of London burned for four days and nights. It razed 436 acres, devouring 13,200 houses, 89 churches ( including Saint Paul’s Cathedral), the Custom House, The Royal Exchange and dozens of other public buildings. Only six people perished in the flames, but hundreds died from shock and exposure.
Not surprisingly, the effects of the Great Fire were galvanizing to a stunned population. Insurance protection as we know it today can be traced to the aftermath of that tragedy and to a man called Nicholas Barbon. Profoundly shaken by the Great Fire, Barbon promptly opened an office “ to insure buildings “. This venture was apparently successful, because in 1680 he founded a partnership and established England’s first fire insurance company, the Fire Office, to insure brick and frame houses.
The second company to be formed, the Friendly Society, was organized in 1683 incorporating some mutual characteristics. Policyholders had to agree to contribute toward settlement of each loss incurred, although the founders retained a predominant interest in the profits.