Insurance is really all about risk. Despite all the complexity built into some different types of insurance policies offered by different insurance agencies, it really just comes down to being protected against risk in its various forms. But to understand why insurance is now a big part of our daily lives, it’s important to know a little bit about the history of insurance and how it came to be so integral to many actions and transactions we take part in during our lives, from driving a car each day to buying a home.

A Short History of Insurance and How it Developed

Believe it or not, insurance can trace its roots back to the dawn of civilization, at least in the basic sense of ‘spreading risk’. Early hunters spread risk by hunting in groups and later on insurance was even built into ancient law codes such as in the Code of Hammurabi. For those living in Mesopotamia during the time of the Babylonian King Hammurabi, basic insurance was granted for debtors who, for some really good reason such as a flood or other personal catastrophe, could not possibly pay back a loan. The middle ages saw a transformation of insurance, mainly in the maritime environment, as separate insurance contracts allowed investments to be separated from insurance. Later on in 1666, property insurance developed following the Great Fire of London which left 13,000 Londoners homeless and many people understanding the great need for insurance against such catastrophes as fire. This desire for property insurance following the Great Fire of London led to a significant increase in insurance businesses. Still in London not too long after, the Lloyd’s of London insurance marketplace emerged out of the need to underwrite business ventures involving shipping. Interestingly enough, Lloyd’s of London is still in existence today after three centuries and still runs as an insurance marketplace made up of corporate and individual ‘members’ which write a wide range of coverage policies, including ‘specialty’ policies such as for satellites, kidnapping, fine art, and even body parts to name just a few of the more unique coverage areas.

In the 18th century and later on we begin to see new types of insurance emerge, mainly as a response to the new risks coming out of the industrial revolution and advancements in technology. Perhaps one of the most useful examples of this can be seen in the creation of auto insurance following the invention of the automobile, with (according to the Ohio Historical Society) the first automobile insurance policy being issued in Dayton, Ohio in 1897. But unlike some other forms of coverage, car insurance later became not just a good idea, but also a requirement.

The Need for Compulsory Insurance for Cars as a Great Example

As much as some people don’t like it, some types of insurance are absolutely necessary if we want to live in a modern society. One of the best examples of this need can be seen with car insurance. After the invention and increased popularity of the automobile, it was only a matter of time before accidents began to increase and the arguments of financial responsibility began to cause headaches for all involved. During the time before compulsory car insurance, it became apparent that even though fault was given following an accident, there was no way of ensuring the party responsible for the car accident would pay up for the damages. States such as Massachusetts and Connecticut responded to the problem in the 1920s by passing financial responsibility and laws which required any driver involved in an accident to prove financial responsibility to satisfy any damage claims over $100. Not too long after, other states began to adopt compulsory automotive coverage requirements, with some differences among states when it came to the enforcement of policy requirements. Nowadays, it would seem strange to live in a world where there was no car insurance and you’d be at risk of paying all the high (and sometimes unbelievably high) costs following a car accident. But thankfully, with a car policy being a requirement, the world is a lot less messy for us and the risks are greatly minimized each time we get behind the wheel.

As we can see from the car example, having coverage matters a great deal as each and every day we face great risks which, without the proper protection, could threaten our financial future and ability to prosper. From car to property insurance, thanks to risk underwriters our lives are simply much less risky and we have the ability to bounce back much faster following a serious setback such as a fire in the home or a bad car accident. Well so much for the History of Insurance from us,

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