History of Insurance: How It All Began

GP Chudal

History of Insurance: How It All Began

Insurance is a way of protecting ourselves from the risks and uncertainties that life throws at us. Whether it is a car accident, a house fire, a medical emergency, or a natural disaster, insurance can provide us with financial security and peace of mind. But how did insurance come to be? What are the origins and evolution of this essential service?


In this article, we will explore the history of insurance, from its ancient roots to its modern developments.

Insurance in the Ancient World

The concept of insurance dates back to around 1750 B.C. with the Code of Hammurabi, which Babylonians carved into a stone monument and several clay tablets. The code describes a form of bottomry, whereby a ship’s cargo could be pledged in exchange for a loan. Repayment of the loan was contingent on a successful voyage, and the debtor did not have to repay the loan if the ship was lost at sea.

This was one of the earliest forms of transferring risk, which is the essence of insurance. Another ancient method of risk transfer was practiced by Chinese and Babylonian merchants, who would divide their goods among several ships or caravans to reduce the chance of losing everything to pirates, thieves, or natural hazards.

In ancient Greece and Rome, insurance was also used to cover funeral expenses, property damage, and personal injuries. The Greeks had a system of mutual aid societies, called eranoi, that collected contributions from members and paid benefits to those who suffered losses or misfortunes3. The Romans had a similar system of burial clubs, called collegia, that provided funeral services and financial support to the families of deceased members.

Insurance in the Middle Ages

In the Middle Ages, most craftsmen were trained through the guild system. Apprentices spent their childhoods working for masters for little or no pay. Once they became masters themselves, they paid dues to the guild and trained their own apprentices. The wealthier guilds had large coffers that acted as a type of insurance fund. If a master’s practice burned down—a common occurrence in the largely wooden cities of medieval Europe—the guild would rebuild it using money from its own funds. If a master was robbed, the guild would cover their obligations until money started to flow in again. If a master was suddenly disabled or killed, the guild would support them or their surviving family. This safety net encouraged more people to leave farming to take up trades. As a result, the amount of goods available for trade increased, as did the range of goods and services.

The basic style of insurance used by guilds is still around today in the form of group coverage. Another form of insurance that emerged in the Middle Ages was marine insurance, which was essential for the expansion of trade and exploration. In the late 1600s, shipping was just beginning between the New World and the Old, as colonies were being established and exotic goods were ferried back. The practice of underwriting emerged in the same London coffeehouses that operated as the unofficial stock exchange for the British Empire.

Underwriters were wealthy individuals who agreed to assume a portion of the risk of a voyage in exchange for a premium. They would sign their names under the description of the ship and its cargo, hence the term underwriting. If the ship arrived safely, the underwriters would collect their premiums and make a profit. If the ship was lost or damaged, the underwriters would pay the claims according to their share of the risk.

Insurance in the Modern Era

The modern era of insurance began with the development of fire insurance, which was spurred by the Great Fire of London in 1666. The fire destroyed more than 13,000 houses and left about 200,000 people homeless. The first fire insurance company was established by Nicholas Barbon in 1667, and soon other companies followed. Fire insurance companies employed their own fire brigades to prevent or extinguish fires, and also introduced fire prevention measures, such as building codes and fire-resistant materials.

Another major development in the history of insurance was the invention of life insurance, which was initially designed to provide financial security for widows and orphans of deceased breadwinners. The first life insurance company was founded by Edward Rowe Mores in 1774, and was called the Society for Equitable Assurances on Lives and Survivorship. The company used a mathematical formula, called the mortality table, to calculate the premiums and benefits based on the age, health, and occupation of the insured. The mortality table was based on the statistical analysis of the life expectancy and death rates of different groups of people, and was a breakthrough in the science of actuarialism.

The 19th and 20th centuries saw the emergence of new types of insurance, such as health insurance, disability insurance, accident insurance, liability insurance, property insurance, and automobile insurance. These types of insurance were created to meet the changing needs and demands of a growing and industrializing society. Insurance also became more accessible and affordable to the masses, as insurance companies expanded their markets and diversified their products. Insurance also became more regulated and standardized, as governments and professional associations intervened to protect the interests of the consumers and the insurers.

Insurance in the Present Era

The present era of insurance is characterized by the rapid development of technology, globalization, and innovation. Technology has enabled insurance companies to collect, store, analyze, and share vast amounts of data, which can improve their risk assessment, pricing, underwriting, claims processing, and customer service. Technology has also enabled insurance companies to offer new and customized products and services, such as online platforms, mobile apps, telematics, peer-to-peer insurance, microinsurance, and parametric insurance. 

Technology has also created new challenges and opportunities for insurance companies, such as cyber risks, data breaches, artificial intelligence, blockchain, and the Internet of Things. Globalization has increased the interconnection and interdependence of the world, which has implications for the insurance industry. Globalization has increased the demand for insurance, especially in emerging markets, where insurance penetration is low but growing. 

Globalization has also increased the competition and cooperation among insurance companies, as they seek to expand their reach and diversify their portfolios. Globalization has also increased the exposure and vulnerability of insurance companies to global risks, such as pandemics, natural disasters, terrorism, and climate change. Innovation is the key to the survival and success of the insurance industry in the present era. Insurance companies need to constantly adapt and evolve to meet the changing needs and expectations of their customers, stakeholders, and regulators. 

Insurance companies need to innovate not only in their products and services, but also in their processes, strategies, and cultures. Insurance companies need to embrace digital transformation, customer-centricity, social responsibility, and sustainability. Insurance companies need to leverage their strengths, such as their expertise, experience, and trust, and overcome their weaknesses, such as their complexity, inefficiency, and inertia.


Insurance is a vital and valuable service that has been around for thousands of years. Insurance has a rich and fascinating history that reflects the evolution of human society and civilization. Insurance has also faced and overcome many challenges and crises, and has learned and improved from them. Insurance is not a static or stagnant service, but a dynamic and progressive one.

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