History of Insurance

The first practice which is similar to modern day insurance is observed in Babylon about 4,000 years ago. In Babylon, the trade center of its time, the financiers lending to the caravan merchants were deleting the merchants’ debts if they were robbed or ransom, and they were getting some money in exchange for the debts over the amount of the principal debt when the merchant gives them their debts. This event was later legalized by King Hammurabi. The biggest feature of the Hammurabi Code was sharing the debts among all other caravans if robbers attacked the caravan. This is the first example of danger sharing in road transport.

Hindu’s began to make loan agreements with insurance features in 600 B.C. These agreements with simple content matters in terms of demonstrating the first steps in insurance by developing the insurance thought of communities. Such credit agreements formed the basis for marine loan and transportation insurance by developing in the middle ages.

Then, implementations more similar to insurance are seen especially where the sea trade is developed. In Carthaginians, Romans and Greeks; they were people who borrowed loans over the amount of the ship was carrying, and getting serious amounts of money and the interests against the risk of the ship was carrying. The excess of these interests were disapproved by the Church and banned after a while. Most likely, this prohibition against dangers that may take the form of a premium in advance, raised the idea of insurance.

Premium based insurance was seen in Venice, Florence and Genoa in about 1250 A.D. Nevertheless, in order to mention the modern day’s insurance, one had to wait for the 14th century. Change of the economic conditions began to show very significant improvements from the 14th century. In those hard times, Italy, the most developed sea trade country at that time, was needed insurance and the marine insurance concept appeared for the first time there. The contract which was regarded as the first insurance policy had the date of October, 23th 1347 and issued in order to assure the load of the ship named “Santa Clara” which was carrying load from Genoa Port to Majorca. Once again, the first insurance company was founded in 1424 in Genoa. The first statutory legislation on insurance was the Edict of Barcelona in 1435. After that beginning in Italy, it is seen that the marine insurances developed especially in the 18th century in England.

The insurance which began and developed on the sea, was led to the idea of life insurance. To be able to insure the ship and the load also brought the idea to insure the captain, passengers and the crew. In the 17th century, in system called “Tontines” brought by the Italian banker Tonti, certain people were coming together and pays a specific currency for a specific period of time, and the survivors were sharing the money when the time has expired. This system was quite popular, because most of the people thought that they were going to live much more longer than the others, they thought that the people who died had the material loss and for who died before the prescribed time, they started to pay for a premium against death risk. And the transition to the life insurances began this way.

The second half of the 17th century has witnessed two important events that led to the development of the insurance industry. The first of these is the implementation of the insurance statistical methods and techniques (Calculus of Probability), and the second one is that large fire occurred in London on September 2, 1666, and continued for 4 days, resulting of the burning of 13,000 houses and churches. These events, which led to the land insurance, brought the idea to create the greatest impact on the public to take precautions against the consequences of such disasters. From this idea forth, after the establishment of “Fire Office” on 1667, the first fire insurance company named “Friendly Society” started to operate. A new are of insurance began by the foundation of Llloyd’s in England on 1688. A coffeehouse located in London and operated by a man named Edward Lloyd became a place that ship owners, businessmen and traders exchanged information relating to maritime commerce. In that place, people who assured the ships over the load of the ship began to issue documents by “Underwriter” title and founded a community called “Lloyd’s” after Edward Lloyd’s death. Lloyd’s turned into a Union on 1871 by a law introduced by the UK Parliamentary. Lloyd’s was just a company operating in maritime commercial at that time, but started to operate on land insurance and now it is an institution that all types of insurance can be taken out.  Lloyd’s is an insurance company that is wholly peculiar to itself and has no other similar companies in the world. In fact, Lloyd’s itself is not an insurance company, it is a community, a union constituted by people who gives insurance assurance and is a world maritime intelligence center at the same time. The most distinctive feature of Lloyd’s is the members have the responsibility with their all assets and they never contact with the insured directly, the relationship is provided by the people or the companies called “Broker”. Brokers registrar to the Lloyd’s in order to work with them and they follow the customers’ both insurance and compensation works.

The birth of modern insurance was led by maritime, the land insurance was led by fire and the accident insurance was led by personal accidents regarding to train accidents, larger technical damages occurred with the development of the industry led to the development of engineering insurances.

In the early 20th century, the insurance companies have completed their organization so that it can respond to all the insurance needs of organizations and reached a level that could serve as effective.