History of Property and Casualty Insurance

Insurance can be said to have appeared with the human society. There are two different types of economies found in a human society: The natural and the non-monetary economies. In the non-monetary economy business is carried out with no central or standardized form of financial policies. This is primitive and the insurance found in such an economy will entail agreements for mutual aid. For instance, if one family's house is destroyed by an accident, the neighbors are supposed to help rebuild it.

Now, turning to the practice of Insurance from a modern perspective i.e. where it is a part of the financial structure of the society. As far as the 2rd and 3rd Millennia BC, respectively early ways of transferring or spreading risk were practiced by Babylonian and Chinese traders. The Chinese business men traveling dangerous river rapids would always spread their goods across many vessels to reduce the loss due to any single vessel's sinking. The Babylonians on the other hand created a system whereby if a merchant receives a loan for the funding of his shipment, then he would have to pay additional money to the lender to get the lender's guarantee that the loan should be cancelled in the event of the shipment being lost at sea or stolen.

In Ancient Persia the Achaemenian monarchs were the first to start insuring their people and legalizing it by documenting the insurance details in the government notary offices. The ensuing insurance tradition became practiced every year in Norouz, where the people and heads of their ethnic groups presented gifts to the monarch. When a gift presented is worth more than the sum of 10.000 Derrick (The Achaemenian Gold currency), it would be recorded in a special office. This was good to the presenters of the gift. The reason for this registering was to ensure that whenever someone that presented a gift registered by the court gets into trouble, then the court and the monarch would come to his assistance.

The inhabitants of Rhodes some thousand years later developed the principle of the general average. This states that merchants having their goods shipped together will pay an equally distributed insurance premium that can be used to repay a merchant whose wares where deliberately thrown overboard to make the ship lighter and prevent it from complete loss.

In London some modes of insurance was already being practiced by the early years of the 17th century, while in the United states the first insurance firm sold fire insurance and was formed in the city of Charles Town, the modern-day Charleston, in 1732. The practice of insurance was popularized and made standard by Benjamin Franklin especially against fire through the form of perpetual insurance. Then in 1752, he started a company known as "Philadelphia Contributionship for the Insurance of House Loss by Fire." This company was one of the first to start making contributions towards fire prevention. His company not only warned again fire hazards, it also did not insure some buildings they considered high risk, such as wooden houses.

Property and casualty insurance enjoys a rich history just like every other insurance policy. Over the centuries man has come to realize that for as long as there is life there would be risks and dangers. And with insurance, the effects of these situations can be mitigated.