Let’s look at “insurance past” and see why it matters now.
What exactly is insurance?
Insurance is “the many sharing the risk of the few.” In other words, many people pool their money ahead of time, to reimburse the losses of a few in the future.
Or put another way, it’s the transferring of risk from one party (you) to another party (a company), in exchange for a fee, or a “premium.” If the risk goes bad, the other party pays up.
We transfer a lot of risk for a lot of premium. How much? According to Wikipedia, in 2013, in the United States alone, we spent over $1.2 trillion in premiums to transfer our risk to someone else.
When did insurance begin?
Insurance was born in China around 3000 BC. Merchants were afraid to put all their goods in one ship, so they got together and split their goods between several ships. That way, if one ship went down in the ocean, no one lost all their merchandise. It was the beginning of “the many sharing the risk of the few.”
How did it change over the years?
Let’s look at some historic milestones:
1750 BC: The Babylonians created a system called “bottomry.” Yes, that’s a real word! Lenders who financed a shipping expedition would agree to forgive the debt if the ship were lost at sea. They did this by adding an extra fee to the cost of the loan.
1347 AD: The first insurance contract that wasn’t bundled with loans was created in Genoa, Italy.
1667 AD: The first “Fire Insurance” policies were created in England as an answer to the great London Fire of 1666. Over 5,000 homes were lost in that disaster.
1688 AD: Lloyds of London, like many great businesses, began in a coffee shop. Investors and shipping tycoons would meet over coffee and decide to share a percentage of the risk of a ship sinking, in exchange for a premium. No one wanted to insure an entire ship by themselves, so they wrote their names “under” the percentage they were willing to “assure.” Here was born the term “underwriting.”
1752 AD: Benjamin Franklin, who loved to invent things, created the Philadelphia Contributorship for the Insurance of Houses from Loss by Fire. It was America’s very first insurance company. Yay Ben!
1897 AD: Gilbert J. Loomis bought the first auto insurance policy. It was issued by Travelers Insurance.
1934 AD: Auto insurance agents become a “thing.” Kids can now grow up to sell car insurance.
Why does any of this matter?
It matters because insurance is an ancient solution to a modern problem. Just like the ancient Chinese, and just like homeowners in London, we all face financial risks that are too big for us alone.
I’m proud to represent an industry that saves people from financial ruin. And I’m proud to help my friends and neighbors in Napa Valley get the best insurance for their needs, at the most affordable cost.
Bruce Sackrison is an insurance property and casualty broker affiliated with Professional Insurance Associates helping clients with insurance needs for personal, commercial and business insurance. Bruce can be reached at 707-931-0186, email@example.com