History of the risk free world – Part Two »

Welcome to the second part of our look at the history of insurance. We ended part one with a look back at beginning’s of health and life insurance in the Greek & Roman empires. It wasn’t until medieval & the early modern times that insurance started to take on a form easily recognisable today.

Separate insurance contracts (i.e. insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century. The first such contract dating from 1347 is a form of marine insurance indicating a clear risk evaluation approach taking into account cargo values, routes and voyage dates. This was the primitive start of modern underwriting.

Underwriting was to become more sophisticated but not until post-renaissance times. It was toward the end of the 17th century and London’s growing importance as a centre for trade increased demand for marine insurance when underwriting took a firm grip of insurance practice.  In the late 1680s, Mr. Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships’ captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd’s of London remains the leading market (note that it is not an insurance company) for marine and other specialist types of insurance.

At this stage much of the insurance market revolved around marine insurance but all that was about to change. It was London again which caused this evolution but this time in rather deadly circumstances. 1666 the ‘Great fire of London’ devoured 13,200 houses & the homes of 70,000 of London’s 80,000 inhabitants. This disaster caused Nicholas Barbon to establish the first Home & Contents insurance company paying benefits in case such a tragedy happened again. This company was named the Fire Office. Part of the paid for service was to offer the extinguishing of fires to insured homes. The company went on to be the foundation of today’s public funded UK Fire Brigade.

By 1693, the first mortality table was created using Pascal’s triangle and modern life insurance soon followed. European insurers thrived in the ensuing market but it was the colonies and their associated risks to living in them that matured the market to its present standing. Join us next time when we discover how the impact of colonial religion, slave trading & the invention of the motor car brought a modernisation to insurance.

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