Term Insurance For Canadian

Insurance is a form of risk management. It can be defined as a transfer of risk from one entity to another in an equitable manner. Insurance primarily covers any risk arising out of loss. The transfer of risk from one entity to another can be achieved through payment of a premium. Insurer is the term used to denote the insurance company which bears the risk.

Origin Of Insurance

It can be said that the history of insurance dates back to the origin of human society.  Two types of economies can be defined. One is the monetary economy and the other is non-monetary economy. In the monetary economy, money and finance play and important role. In non-monetary economy, money and finance are not involved. Non-monetary economy is a more ancient form of economy than monetary economy. In non-monetary economy, insurance took the form of people helping one another. For example, if a person’s house is destroyed by storms, the neighbors gave him/her shelter. If the neighbors do not help, they will not receive help in the future when they are facing a crisis.

In monetary economy, the history of insurance can be traced back to ancient China and Babylonia. Ancient Chinese and Babylonian traders were practicing methods of transferring risk from one party to another as early as 3000 and 2000 B.C. respectively. Ancient traders in China have to travel across dangerous river rapids to sell their goods. These merchants used to distribute their goods across many ships in order to minimize the loss if one or more ships sinks or are destroyed. This system of minimizing the risk is the earliest form of insurance.

The Babylonian traders went one step further. They practiced a system which was recorded in the well-known Code of Hammurabi. The system of the Babylonian traders was practiced by ancient merchants who sailed the Mediterranean Sea. Merchants usually borrowed loans from moneylenders to finance their shipments. While borrowing the money, the merchants would pay an additional amount of money to the moneylenders. In return, the moneylender would guarantee that the loan would be canceled in case the shipment is stolen or destroyed.

First Records Of Life Insurance

The first records of life insurance were created by Achaemenian monarchs in ancient Iran. They were the first to insure their people. They also made the process official by recording it in the government notary offices. The process of registering took place every year at the beginning of each year. The heads of each ethnic group and everyone else, who wish to be present, assemble and give gifts to the Achaemenian monarch. Each gift is assessed and recorded by the court. If the value of the gift exceeds ten thousand derricks, the gift is recorded in a separate office. The reason for registering each gift is that when the person who presented the gift is facing any kind of trouble, the court as well as the monarch will help the person. Jahez, an ancient historian has written in his book that if the person who gave the gift is facing any trouble or wishes to build a house or wants to get his children married, the court official checks the registry. If the gift’s value exceeds 10,000 derrick, the person is paid twice the amount in order to help him meet his needs.

The next record in the history of insurance dates back thousand years after the Achaemenian monarchs. The people living in Rhodes developed a concept called General Average. Merchants used to ship their goods together. Such merchants who shipped their goods together in the same ship used to pay a premium which was proportionally divided among them. This money was used to reimburse them if their goods were stolen or lost due to storms at sea.

Life And Health Insurance

The Greeks and Romans were the first to introduce proper life and health insurance in 600 A.D. They created guilds called “benevolent societies”, which would take care of its members and pay funeral expenses in case a member dies. Such guilds also existed in the middle ages. They also served the same purpose as the “benevolent societies” of Greece and Rome. In England, prior to the establishment of insurance companies, “friendly societies” existed. In such societies, people can join as members. They should contribute certain sums of money towards a general fund. This money would then be used to help members when they face emergencies.

Insurance contracts which were separated from loans and other contracts were first invented in Genoa during the fourteenth century. Insurance pools which were supported by landed estates were also invented. This helped to separate insurance from other investments. This separation of insurance from other assets was proved useful in marine insurance. Insurance slowly developed and became more sophisticated and more specialized types of insurance were developed in Europe after the Renaissance.

Origin Of Other Insurance Companies

In the late seventeenth century, London was gaining importance as a business hub. As a result, the demand for marine insurance increased. A coffee house opened by Edward Lloyd in London in the late seventeenth century was the regular meeting place of ship owners, traders and underwriters. It was the most reliable source of the latest news about shipping; those who needed marine insurance and those willing to underwrite the same, could meet and talk in the coffee house. Many deals were finalized at this coffee house. To this day, Lloyds of London remains the market leader in marine and other specialized types of insurance. Other insurance companies started springing up all over Europe. The need for insurance increased as European countries became more industrialized.

First Fire Insurance

The first fire insurance company in England was started by Nicholas Barbon in 1680, after the Great Fire of London destroyed more than 13,000 homes. This company insured houses made of brick and wood. The first insurance company in the USA was established in Charleston, South Carolina in 1732. This company sold fire insurance. Initially, insurance was not very popular in the USA. Benjamin Franklin popularized and standardized the concept of insurance. He made people aware of the need for insurance, particularly against fire. He founded a company called Philadelphia Contributionship for the Insurance of Homes from Loss by Fire in 1752. This company was the first to make contributions to people who lost their homes in fires. The company made people aware of the dangers of fire. The company also went one step further. It refused to insure buildings in which the risk of fire was greater.

The 1835 fire in New York further highlighted the need for states to maintain reserves to reimburse people for losses suffered due to fire. Massachusetts was the first state which created laws that required the state to maintain reserves. The fire in Chicago also highlighted the need foe reserves. People started taking fire insurance seriously after that. Slowly, other forms of insurance also developed in the USA.

Development Of Life Insurance

The nineteenth century saw the development of many friendly societies which gave life and health insurance to members. Many fraternal orders were also established, which gave low-cost life insurance to members. Slowly companies started to include life and health insurance in their portfolios. Pressure also increased on the governments of countries to enter into the insurance field. The US government established the Social Security scheme to provide health and other facilities for people who are too poor to afford them.