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by Ira Lanes
June 03, 2009
Everyone talks about having insurance: health insurance, car insurance, home insurance and more. Insurance has become a must for most people.

What is insurance? Insurance is simply defined as indemnity or protection against a future loss. There are many definitions to insurance but the gist for most is that the person or company who paid for insurance gets compensated for a loss.

The concept of insurance dates back to the second and third millennia. The Chinese and Babylonians practiced insurance as early as then. The Code of Hammurabi documents the insurance system practiced by the Babylonians. The Achaemenian people were the first to be insured by their ruling monarch.

The people of Rhodes were the ones who invented the concept that came to be known as the general average. This was applied to the goods of merchants which were transported or shipped together. These merchants paid a premium that was divided into fair proportions. This premium would then be used to pay any merchant who lost his goods at sea.

However, it was the Greeks and the Romans who introduced benevolent societies that would become the precursor for life and health insurance. These societies took care of families and paid for expenses occurred for the funeral in case a member died. Guilds did the same in during the Middle Ages. The Talmud dealt with the insurance of goods. Friendly societies in England had their members donating money to be used in emergencies.

In Genoa, during the 14th century insurance contracts that were separate from loans or other contracts were invented. Landed estates were also used to back insurance pools. These let insurance set apart from investment. This was an important milestone in the history of marine insurance.

However, it is London's Great Fire that was responsible for bringing to life modern insurance. After the fire consumed over 13,000 houses, churches and City buildings, Nicholas Barbon opened the first company to offer fire insurance for homes.

Hugh the Elder Chamberlen of the family of Peter Chamberlen proposed the idea of health insurance. In the latter part of the 19th century, another form of insurance was adopted; accident insurance. This type of accident insurance is similar to the modern concept of disability insurance.

In the USA, the very first company that offered insurance was created in Charles Town, South Carolina. This was in 1732. The company offered insurance against fires.

It was Benjamin Franklin who helped standardize insurance practices especially against fire. Benjamin Franklin's company was first to help towards fire prevention. His company refused to insure buildings that carried great risks of catching fire. It was also his company that warned the people of hazards that increased the fire risks.

Life insurance began in the United States in the 1760s. Presbyterian Synods and Episcopalian priests were at the forefront of this movement.

It is interesting to note that life insurance companies also insured slaves for their respective owners before the breakout of the great American Civil War. New York Life reports that Nautilus sold close to 500 policies of the sort. They added though that such policies were discontinued a good 15 years before Emancipation.

Accident insurance was first provided in 1850, primarily for railroad and steamboat injuries. The accident insurance industry was rapidly organized. Sickness coverage on the other hand, began to be effective starting 1890. In 1911, the first group disability plan sponsored by employers was started.

It was in the 1920s that hospitals began to offer pre-paid services to individuals. This led to the organization of the Blue Cross services. Current HMO's can trace their origins to 1929 all the way to World War l.

All these have led to the creation and modernization of the insurance practices that are currently prevalent.

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