Most people buy it and hope they will never need it. Some work with it every day, in fact if you’re reading this blog there a good chance you do too. It’s advertised in virtually every TV break and brings income of over $4,000bn to its global sector. It’s the insurance industry but did you ever ask how it all started? Let’s step back in time to the ancient world.
The ancient world was a risky place. Especially if you were a merchant and you were transporting goods. So risky in fact that one of the world’s biggest financing concepts was initiated to combat it. In 1750 BC the Babylonians developed a system which was recorded in the famous Code of Hammurabi and practiced by early Mediterranean merchants. If they received a loan to fund a shipment, the merchant would pay the lender an additional sum in exchange for the lender’s guarantee to cancel the loan should the shipment be stolen.
It was sometime later and in different empire altogether that the idea of personal insurance started to form. Beginning around 550 BC at the time of the First Persian Empire, an insurance tradition was performed at the beginning of the Iranian New Year. The people presented gifts to the monarch. The presents were assessed by the confidants of the court. If a gift was deemed worth more than 10,000 Derrik (Persian gold coins) it would be registered in a special office. The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. An ancient Persian scribe recorded at the time ‘Whenever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much.’
Of course, no historical piece could ever be written without mention of the Greeks and Romans. It was they who introduced the origins of health and life insurance when they created guilds called “benevolent societies” which cared for the families of deceased members, as well as paying funeral expenses of members.
Next time we will look at how the Great Fire of London led to a modernisation of insurance practice & how a coffee shop owner gave birth to the unique skill of underwriting.