Insurance is primarily a means of protection, especially from financial losses. It is thus an instrumental form of risk management primarily used in hedging against the vulnerabilities and risks of contingencies and uncertain losses. Its history traces the inception and development of modern business, especially of insurance against perils regarding property, automobile accidents, cargo, and medical treatments, among others. Since the inception and history of insurance, as will be extensively discussed herein, it has grown to become one of the most integral components of economies, generating massive profits and providing attractive employment opportunities, especially for masses of white-collar employees.
Arguably, insurance traces its roots back to the early human society (Encyclopaedia Britannica, 2014 ) . In ancient human societies, there were two primary forms of economies; non-monetary and monetary. In the former, insurance entailed mutual agreements of help in the events of any eventualities or occurrences such as fires. In monetary economies, the premier techniques of distributing and transferring risks were initially practiced by the Chinese as well as Babylonian traders, before it was further adopted by many others such as ancient Persians, Athenians, Greeks, and Romans who even introduced life and health insurances through creation of guilds that essentially cared for deceased families and settling funeral expenses. Bottomry contracts are among the earliest insurance forms practiced by Babylon merchants. These contracts involved granting of loans to merchants albeit under the provision that if any shipments were lost, then the loan was not repayable (Charles Farley, 2009).
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Modern insurance dates its advancement to the Enlightenment era, the period during which specialized varieties arose. For example, property insurance came forth following the historic London’s Great Fire of 1666, thereby making insurance to be a matter of urgency, as opposed to convenience (Vance, 1908). Life insurance was subsequently adopted in the early 18 th Century, whereby the first organization to provide life insurance was created in 1706, in London (Dahl, September 8 2013 ) . Continually, distributing risk became even more sophisticated and penetrated further into societies through the years, giving rise to the onset of modern insurance.
One of the most monumental events that shaped modern insurance is the inception and consequent development of the Philadelphia Contributionship, an impeccable move that created a great connection between early and modern insurance. Philadelphia Contributionship is arguably the oldest property insurance organization in the history of the United States, and it was organized in 1752 by celebrated statesman and inventor, Benjamin Franklin. It was later incorporated in 1768 (Beattie, 2018) . The scheme was initially structured to be a mutual insurance entity that aimed to provide insurance against inferno to limited areas within and without Philadelphia. This scheme consequently introduced numerous radical principles, which underpin modern insurance methodologies and techniques to date.
During the early 18 th Century, a fair majority of houses were made solely of wood, and this thus put them at significant perils of destruction by fires that commonly broke out (The Colonial Williamsburg Foundation, 2011) . Settlements which grew into cities and towns such as Philadelphia were built close to each other further endangering residents in case of fires. This is one of the cardinal factors that motivated Benjamin Franklin, a firefighter, to invent the Philadelphia Contributionship scheme to insure houses and property from losses due to infernos. Similar to modern insurance frameworks, the Company pooled resources from policyholders and insured entities or exposures, and these proceeds would be used to pay for any losses that some incurred. The exposures were thus protected from fire risks for a certain rate, and this rate was solely based on the severity and frequency of fire hazard occurring. The scheme set new standards and regulations for building residential houses, especially considering it even refused to provide insurance to any building that they deemed as a fire hazard (The Philadelphia Contributionship, n.d.) . By so doing, Philadelphia greatly aided in rising to the occasion and revamping the field of insurance in a manner that the world had never seen before.
Philadelphia Contributionship thus goes down the annals of history as the premier company to successfully introduce the inspection of the property to be insured (Beck, 1952). This is still adopted as a norm in all insurance entities across the globe, whereby insurance companies stringently scrutinize every property or any other specialization before providing insurance, and this is one of the basic principles of modern insurance. Prior to formally acknowledging any property for insurance, the Philadelphia Contributionship Corporation sent expert surveyors out for inspection, who would hence determine the eligibility of the property for insurance.
Additionally, the Philadelphia Contributionship scheme also introduced the setting of particular rates, wholly depending on the risk assessment. This is yet another principle that was adopted by successive modern insurance entities and is still in effect. Before any contractual insurance agreement is okayed today, a thorough and in-depth risk assessment exercise is paramount, as the process helps to analyze and evaluate the probability of risks therein, the likelihood of hazards happening, as well as any mitigation modalities. Based on data from the risk assessment, respective rates are set, as was the case in Philadelphia Contributionship policy frameworks. The company further strived to ensure that houses which were not constructed to the expected or specified standards and thresholds were excluded from coverage. In line with the Company’s policies, insurance rates could be revised upwards, especially for unsafe and rather risky living practices, for example, the storage of any combustible substances and materials, especially in wooden houses and constructions. The criteria that Philadelphia Contributionship employed in evaluating buildings would be later reworked into zoning laws and building codes. The current modern insurance still upholds this principle, whereby insurance companies are reluctant to enter any agreements with any party or entity that does not meet the specified and stipulated thresholds for compensation and indemnity. This thus exemplifies how early insurance reflects the principles of modern insurance.
Throughout history, the various forms of insurance provided have since been expounded further, specifically in reaction to newer risks. Accident policy, auto insurance policy and many others were introduced, and with time, newer forms were incepted to match the rising risks informed by an increasingly modernized world (Dups Group, n.d.). Noteworthy, the new policies were largely connected to the principles outlaid by early companies in the young insurance industry, heavily borrowing from the precedents set by early insurance companies such as Philadelphia Contributionship.
Today, the insurance industry has grown by leaps and bounds, and it has adopted numerous principles and policy frameworks that were non-existent in the early insurance era, as is the case with other industries altogether. For example, the insurance industry has largely adopted automation, and the explosion in internet and innovation has since revolutionized the industry significantly by blowing this field wide open (Chen, 2014 ) . People today find the cheapest and most convenient providers online with ease , and this has been a pivotal source of inspiration, especially for practicing corporations to expand their financial services. Modern insurance has increased and penetrated into the global market. It has also incorporated integrating services, providing crucial domestic advantage especially with clients that are more concerned with convenience as compared to price. Nonetheless, that modern insurance was immensely informed by principles and precedents set by early insurance modules and companies such as Philadelphia Contributionship and many others, is not in contention. It is upon the dictates and principles of early insurance that the industry has insurmountably expanded to be an instrumental pillar of economies and financial service provision across the globe.
References
Beattie, A. (2018, July 8). The History of Insurance in America . Retrieved from Investopedia.com : https://www.investopedia.com/articles/financial-theory/08/american-insurance.asp
Beck, H. R. (1958). Book Review: Wainwright, Nicholas B., A Philadelphia Story: The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Western Pennsylvania History: 1918-2016 , 41 (1), 75-77.
Chen, N. (2014, December 17 ). The Internet of Things is Transformative . Retrieved from www.towerswatson.com: https://www.towerswatson.com/en/Insights/Newsletters/Global/Emphasis/2014/the-internet-of-things-is-transforming-the-insurance-industry
Dahl, C. (September 8, 2013 ). A Brief History of Life Insurance. ThinkAdvisor .
Dups Group. (n.d.). The History and Evolution of Insurance . Retrieved from DupsGroup.com: http://dupsgroup.com/index.php/news-and-events/36-the-history-and-evolution-of-insurance
Encyclopedia Britannica. (2014 ). Historical Development of Insurance. Encyclopedia Britannica .
The Colonial Williamsburg Foundation. (2011, April). Colonial Williamsburg . Retrieved from www.history.org: http://www.history.org/history/teaching/enewsletter/volume7/sept08/firefighting.cfm
The Philadelphia Contributionship. (n.d.). The Philadelphia Contributionship History . Retrieved from 1752.com: https://1752.com/about-us/history/
Trenerry, C. F. (2009). The origin and early history of insurance: Including the contract of bottomry . The Lawbook Exchange, Ltd.
Vance, W. R. (1908). Early History of Insurance Law. Colum. L. Rev. , 8 , 1.
