Casualty Insurance History

The Beginnings of the Modern Insurance Industry

The oldest of the contemporary insurance sectors, Marine insurance, appears to have begun in Italy sometime in the thirteenth century. Thanks to the Lombard merchants, it extended to other countries, then to England, which dominated British trade and banking in the fifteenth century. Individuals, rather than insurance firms as we know them now, wrote the early marine insurance. A shipowner or merchant who wanted the ship or cargo to be protected created and distributed a sheet with information about the boat, its consignment, destination, and other relevant information. Those who agreed to accept a portion of the risk signed their names beneath the risk description and agreement terms.

The term "under-writer" was coined to describe someone who selects and rejects risks due to this practice of "writing under" the agreement. Individuals who organized themselves into groups of underwriters and shipowners seeking insurance found the coffeehouses of London to be convenient meeting locations. Because the proprietor of one of the coffeehouses, Edward Lloyd's, made paper, pencils, and shipping information available, it became the primary meeting site. Lloyds of London was born out of this café.

Life insurance was the second modern branch of insurance. In 1536, a syndicate of maritime underwriters in London awarded a confident William Gibbons what looks to be the first current life insurance policy. The policy was £400 for a one-year term. Gibbons died within a year of his death, and the underwriters received £400. Other such attempts were made (although probably not by the underwriters who had insured Gibbons).

Although Edmund Halley (of Halley's comet fame) produced a mortality table in 1693, it took nearly a century for any degree of precision in predicting mortality to be reached. The Society for the Assurance of Widows and Orphans, a London company created in 1699, was the first modern life insurance organization to charge the same price to all insureds. It was a failure, as were several others that followed it. The Equitable Society for the Assurance of Life and Survivorship, founded in 1762, was the first to establish premiums that varied according to the insured's age and were instantly successful.

In the contemporary period, fire insurance dates back to 1666, when the Great Fire of London happened. The fire burned for five days, virtually destroying the city and igniting the modern fire insurance industry. During the restoration of the town, an English physician named Nicholas Barbon (who had been somewhat unsuccessful in medicine) entered the construction business and, at the same time, began the business of insuring the newly built dwellings against fire loss. Others quickly followed in his footsteps.