Introduction: -
“An agreement by which a company or the
state undertakes to provide a guarantee of payment for particular losses,
damages, diseases or death in return for payment of a specified premium.”
History: -
There are two types of
economies in human societies. The first one is non-monetary economies in which there is only barter system or trade without using
currency or markets or any centralized standard.
The 2nd is monetary economies in which appropriate currency
or market process is involved through a legal framework.
Insurance in Ancient
World: -
In ancient
world insurance was a process like barter system. It was also a process of
mutual aid. For example if my house is destroyed than my neighbor will help me
to rebuild it. This type of insurance is still present in those parts of world
where non-monetary economies exist.
1st
Monetary Insurance in the World: -
In 1st millennia
BC, inhabitants of Rhodes made a “general average”. This was first monetary
insurance in the world in which market and currency was involved. “General
Average” allowed the merchants to pay for insure their goods. If any merchant
goods were stolen or lost in any accident or in sea, then this payment would
use to reimburse the merchant.
2ndly Babylonian
started Monetary Insurance: -
It was 2nd
millennia BC when Babylonian introduced the monetary insurance. If a merchant
received the loan to fund his shipment, he would pay the lender in additional
sum in exchange for the lenders guarantee to cancel the load in way that ship
is stolen or lost at sea.
Chinese Merchants
Insurance System: -
After Babylonian, in 3rd
millennia BC, Chinese merchants practiced the monetary insurance. Chinese
merchants travelling traitorous river rapid would redistribute their goods
across many vessels to limit the loss due to any single vessel’s overturning.
When Health &
Life Insurance Started??
Almost 600 BC, Greeks and
Romans introduced the types of insurance. They introduced health and life
insurance. They created “Benevolent Societies” which named “Guilds”.
The purpose of Guilds was to care of families who are earning source deceased.
A guild also provides the expenses for funeral ceremony to members.
Friendly Societies
in England & Property Insurance: -
In 17th centuries,
Friendlysocieties were made in England. These friendly societies donate
the money to general sum that could be used for tragedies.
Even Modern insurance was
also developed in England in 17th century. Robert Hayman mentioned
two policies of insurance taken out with the Chancellors of London, Arthur
Duck. One of Property Insurance or Goods Insurance and 2nd was Life
Insurance. Robert describes that “Of the value of 100 Pound each, one was about
for the safe arrival of my ship in Guyana. Other 100 Pound was insured for my
life.”
1st
Property Insurance Company: -
In 1681, economist Nicholas
Barbon with 11 associate members established 1st property insurance
company with the name “Insurance Office for Houses”. This office was established at the back of
Royal Exchange and its purpose was to insure the brick and frame homes. In
those days, Five Thousand (5000) homes were insured by them.
With passage of time, many
new companies were founded by extending their insurance like fire insurance. In
beginning these companies insured every type of homes old or new. There were no
boundaries. But in 18th Century there were a large number of
insurance companies in market but their standard were also changed. These
companies reduced their insurance and refused to insured those houses where
risk of damages or fire was too great like wooden houses.
1st Life
Insurance Company: -
In 1706, first Life Insurance
Company “AmicableSociety for a Perpetual Assurance Office” established in London
by “William Tablot” and “Sir Thomas Allen”.
The plan of this insurance
company was that each policy holder paid a fixed annual payment per share on
from one to three shares with consideration to the age of members. Age limit
was twelve to fifty five. At the end of year, a portion of amicable
contribution was divided among the wives and children of deceased members.
1st Accidental Insurance
Company: -
In 1848, 1st
Accidental Insurance Company was established in London named “RailwaysPassengers Assurance Company”. It was registered by the Commerce
Ministry of England as “Universal Causality Compensation Company. The main
purpose of this accidental insurance company was grant assurances on those
lives of person travelling by Railway and to grant, in cases, of accident not
having a fatal termination, compensation to the assured for injuries received
under certain conditions.
1st National Insurance Act: -
National Insurance was first time implemented by British Government in
1911. The National Insurance Act was
legislated by Liberal Government led by H. H. Asquith and David Lloyd George. This
Insurance Act gave the British working classes the first contributory system of
insurance against illness and unemployment.
All workers who earned under
£160 a year had to pay 4 pence a week to the scheme; the employer paid 3 pence,
and general taxation paid 2 pence. As a result, workers could take sick leave
and be paid 10 shillings a week for the first 13 weeks and 5 shillings a week
for the next 13 weeks. Workers also gained access to free treatment for
tuberculosis, and the sick were eligible for treatment by a panel doctor. The
National Insurance Act also provided maternity benefits. Time-limited
unemployment benefit was based on actuarial principles and it was planned that
it would be funded by a fixed amount each from workers, employers, and taxpayers.
It was restricted to particular industries, cyclical/seasonal industries like
construction of ships, and neither made any provision for dependents.
By 1913, 2.3 million were
insured under the scheme for unemployment benefit and almost 15 million insured
for sickness benefit.
