Insurance Plan, The History, The Concept , The Premiums

Insurance Plan, The History, The Concept , The Premiums

The insurance plan was developed for modern day laws and as a means of providing individuals and businesses with protection against risks.  Prior to insurance being offered, as a service and product, when people ran into problems the community would come together to make repairs.  For instance, before insurance was formally offered, if a neighbor’s home were to burn down, other neighbors, family members, and friends would gather all the necessary materials and tools, and together rebuild the home.  However, as population grew this small community in most parts of the world changes.

Interestingly, the insurance plan that we know of today was actually based on ancient traditions of the Babylonian and Chinese traders.  Historians tell us that during the second and third millennia BC, merchants in China would have to travel over horrific rapids of the rivers as a means of distributing the things they made.  To accomplish this, the wares were moved using several vessels because it was common for one to capsize.

By 1750 BC, the Babylonians created a unique system whereby a merchant would be provided with a loan to pay for the shipment of wares.  Then for an additional amount of money, the lender guaranteed if the shipment of goods were stolen, the loan would be cancelled.  In a crude sort of way, this system was the beginning of the insurance plan that would evolve over the years to what we know insurance coverage of today to be.

Then for the individual insurance plan, one that was not connected to loans, this was invented during the 14th century in Genoa.  At that time, the insurance was backed with land.  By the 15t century, an insurance plan for maritime coverage was offered although it came with risks and premiums varied dramatically.  In this case, this new type of insurance plan made it possible for insurance to be separated from an investment, which proved highly beneficial.

Then in 1628, a very rich man from London took out two types of insurance plan, one being for maritime coverage, and the other insurance plan for life protection.  With London becoming an increasingly important part of the world for trade, a man named Edward Lloyd who owned and operated a coffee house became a viable part of the city, providing people with shipping news and offering a place for merchants, ship captains, and ship owners to gather.  There, men could take out an insurance plan of sorts with one another and this venture became known as Lloyd’s of London, which today still provides the same service for the insurance plan.

The insurance plan that we are all accustomed to in today’s world, which includes policies for home, both owning and renting, automobiles, life, health, marine, dental, vision, and more.  The modern insurance plan actually has a link to the 1666 Great Fire of London, which destroyed more than 13,000 homes.  Realizing something had to be done, a man by the name of Nicholas Barbon opened an insurance office, and just 14 years after this horrific fire, the first fire insurance company in London was formed to provide protection for frame and brick structures.

Then for the health insurance plan, this concept was brought up by Hugh, who was the Elder of the famous Peter Chamberlen family in 1694.  While health insurance remained the primary type of insurance protection for many years, by the latter part of the 19th century, accident insurance was created.  At that time, the accident insurance plan was similar to disability insurance used today.  By 1732, the first insurance company in the US underwrote fire insurance in Charles Town, South Carolina, today known as Charleston.

Over the years, many other types of insurance plan options would be developed and the coverage would change.  Sadly, in the 20th century, organized crime used insurance for extortion, generating tax free income while controlling businesses.  However, it was after the Social Security Act was passed by the federal government that the overall concept of the insurance plan changed.  At that time, policy types grew, requirements became more structured, and premiums more affordable.

Regardless of the insurance plan a person purchases, they end up with a legally binding agreement with the insurer that if damage or loss were experienced specific to the type of protection, the policy would pay.  In exchange, consumers pay a premium each month for the insurance plan, which provides not only protection but also peace of mind.