The Clipper Ship "Flying Cloud" off the Needles, Isle of Wight, by James E. Buttersworth, 1859-60.
The following post was contributed by Nina Bernice exclusively for 101centavos.com
The need to protect ourselves against risks is one of the oldest and most primal instinct. From thorny kraals and fires to keep out prey animals at night, to having a rear guard to defend the supply wagon train from attack, humans have always sought to ensure safety and security.
Insurance dates back to ancient Egypt, to 2,700 BC. Historians believe that guilds of stonemasons banded together to create a type of mutual assurance fund to cover their funerary expenses. There is similar recorded evidence of the assurance funds for masons in the the Roman Empire.
The human endeavor most directly responsible for the development of risk insurance was surely maritime trade and navigation. Once early traders set sail in a hugely expensive cargo vessel, be they Phoenician or Greek or Roman, the merchant backers of the trade voyage spent anxious years waiting for their return, hoping to see the ship again fully laden with valuable trade goods such as silks, spices, precious metals or slaves.
Seafaring trade refined all the various ways in which investors sought the protection of insurance, the principal goal of which was to protect the free individual enterprise from unforeseen events. Rather, the occurrence of natural events such as storms was entirely foreseeable. There would always be fearful storms in the Mediterranean sea. What was unpredictable was their location, severity and the ability of the ships’ crews to weather the rough seas.
Given that sea trade was a major need driver of risk mitigation, it is logical that the cities and areas active in shipping and trade would have originated some of the first insurance companies.
Francesco Di Marco Datini - The Merchant of Prato - "Here's your insurance policy. Trust me!"
Therefore, it is in 13th century Renaissance Florence and Pisa (with navigation access on the river Arno) and trading power Genoa (on the Ligurian coast), that the first insurance contracts are recorded in the latter part of the 1300′s. The first known insurance company came to be in the larger port city of Genoa, and was called Tam Mari Quam Terra, loosely translated from Latin as On The Seas As On Land.
Assicurazioni Generali is another one of the oldest and largest European insurance groups that can count on origins rooted in the maritime trade. AG was founded in 1831 in northern Italian City of Trieste, the primary sea port for the Austro-Hungarian Empire, and is still very much in business to this day.
Note from 101C: one of the earliest recorded contract of indemnity was found in the archives of Francesco di Marco Datini, a wealthy Medieval-era merchant in my home town of Prato. That’s according to official record. According to unofficial local lore, Datini is also thought to be the earliest practitioners and even inventor of the letter of credit as a financial instrument. No idea if it’s actually true, but it’s a nice story and I’m sticking with it.
The city of London was another center of insurance innovation. Edward Lloyd’s coffeehouse was the birthplace of Lloyd’s of London. From Wikipedia:
This establishment was a popular place for sailors, merchants, and ship owners, and Lloyd catered to them with reliable shipping news. The shipping industry community frequented the place to discuss insurance deals among themselves. Just after Christmas 1691, the coffee shop relocated to Lombard Street (a blue plaque commemorates this location). This arrangement carried on until 1774, long after Lloyd’s death in 1713, when the participating members of the insurance arrangement formed a committee and moved to the Royal Exchange on Cornhill as The Society of Lloyd’s.
London was also the birthplace of property and life insurance. Social insurance, or the concept that workers’ welfare should be provided by the state, had its origins in Bismarkian Germany of the late 19th Century.
Fast forward to modern day, and insurance choices are as varied as they are competitive. The internet has enabled information to be easily found and spread. Risk is apportioned, shared, and re-insured. Consumers are able to access the cheapest insurance quotes just by dint of a few minutes’ web browsing.
While medical insurance remains one area where costs are spiraling, commercial and travel insurance are products that have come a very long way from the first handwritten contracts drafted by a Florentine scribe.
(by the way, standard disclaimers apply. All contents for informational and educational purposes only, not to be substituted for professional advice, etc. etc.)
Interesting historical perspective. Insurance meets an important need, and clearly this was identified by our earliest societies.
@ Hunter – the stonemasons fund is only what we know from written record. I wonder if there were other examples which are now lost to us.
Although I am covered by health insurance, I hope we don’t have to wait much longer for a real solution to the escalating costs.
Hi KC – hopefully we won’t have to wait very long for other approaches to health insurance. What we have now is weird enough.
This is very interesting. I was not aware how the current form of insurances came into being. It’s nice to get the historical perspective.
Hi Roshawn – I think the Bismarck-era social insurance probably deserves another post.
Very interesting. Life was much more precarious back then and most people did not have insurance. We all need that service now though.
@ RB40 – nasty, brutish and short – I think that was how it was defined
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Great stuff. Will include in my Weekend Reading roundup!
Hi MOA – glad you stopped by. I wonder what the fine print looked like on those handwritten contracts.
I love this! I could see this as a Planet Money topic (just a suggestion!)
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Ancient Egyptian masons using funerary insurance? That’s sensible and a little depressing, all at the same time.
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So that is how the whole insurance thingy started. Thanks for sharing. I had no clue.