2. Introduction and History of Insurance

3. Introduction and History of Insurance
What is Insurance?What is Insurance?
Provides protection againstProvides protection against
financial lossesfinancial losses
byby
Pooling the resources ofPooling the resources of
policyholderspolicyholders

4. • Insurance is created when peopleInsurance is created when people
like you and your neighbors poollike you and your neighbors pool
their resources to protecttheir resources to protect
themselves from lossthemselves from loss
• If the risk of loss can be spreadIf the risk of loss can be spread
over a large enough group, theover a large enough group, the
effects of the loss to any oneeffects of the loss to any one
individual can be minimizedindividual can be minimized
Introduction and History of Insurance

5. Introduction and History of Insurance
Where did insurance come from?

6. Introduction and History of Insurance
““The Code of Hammurabi”The Code of Hammurabi”
Created by the Babylonians around 2100Created by the Babylonians around 2100
B.C. to guarantee safe arrival of their goodsB.C. to guarantee safe arrival of their goods
by caravanby caravan

7. • WeatherWeather
What types of perils would the caravanWhat types of perils would the caravan
have faced?have faced?
• TheftTheft • BreakdownsBreakdowns

8. Introduction and History of Insurance
As history progressed, the need forAs history progressed, the need for
insurance increasedinsurance increased
The Phoenicians and Greeks usedThe Phoenicians and Greeks used
insurance for their seaborneinsurance for their seaborne
commercecommerce
The Romans were the first to use burialThe Romans were the first to use burial
insuranceinsurance

9. Introduction and History of Insurance
The first Insurance Company wasThe first Insurance Company was
formed in 1688 in Londonformed in 1688 in London
(Lloyds of London)(Lloyds of London)
Merchants, Ship-owners, andMerchants, Ship-owners, and
Underwriters met at a coffeehouseUnderwriters met at a coffeehouse
to discuss how to protect the seato discuss how to protect the sea
voyagesvoyages

10. Introduction and History of Insurance
Modern insurance traced back to theModern insurance traced back to the
“Great Fire of London” in 1666“Great Fire of London” in 1666
13,200 houses were destroyed13,200 houses were destroyed
Societies were formed to pool money forSocieties were formed to pool money for
losseslosses
Also created the need for modernizing fireAlso created the need for modernizing fire
fightingfighting

11. Introduction and History of Insurance
The first American InsuranceThe first American Insurance
Company was formed inCompany was formed in
Charleston, South Carolina in 1735Charleston, South Carolina in 1735
Fire Insurance Companies beganFire Insurance Companies began
spreading to New York City andspreading to New York City and
PhiladelphiaPhiladelphia

12. Introduction and History of Insurance
Benjamin FranklinBenjamin Franklin
• Founded America’s first successful insuranceFounded America’s first successful insurance
companycompany
• Founded the first mutual insurance companyFounded the first mutual insurance company
• Encouraged prevention by educating the publicEncouraged prevention by educating the public
about fire hazardsabout fire hazards
• Refused to insure wooden buildingsRefused to insure wooden buildings
• ““An ounce of prevention is worth a pound ofAn ounce of prevention is worth a pound of
cure”cure”

13. Introduction and History of Insurance
Insurance is Big BusinessInsurance is Big Business
United States Insurance IndustryUnited States Insurance Industry
• Trillion dollar businessTrillion dollar business
• Employs over 2.5 million people in USEmploys over 2.5 million people in US
• As the population ages and wealth grows theAs the population ages and wealth grows the
industry will continue to expandindustry will continue to expand