Evolution of Insurance

The origin of insurance is lost in antiquity.

The earliest traces of insurance in the ancient world are found in the form of marine trade loans or carriers’ contracts which : include an element of insurance.

Evidence is on record that arrangements embodying the idea of insurance were made in Babylonia and India at quite an early period.

In Rigveda, the most sacred book of India, references were made to the concept of ‘Yogakshema’ more or less akin to the well-being and security of the people.

The codes of Hummurabi and of Manu had recognized the advisability of provision for sharing the future losses.

However, there is no evidence that insurance in its present form was practiced prior to the twelfth century.

1. Marine Insurance

The marine insurance is the oldest form of insurance.

Under Bottomry bond, the system of credit and the law of interest were well-developed and were based on a clear appreciation of the hazard involved and the means of safeguarding against it.

If the ship was lost, the loan and interest were forfeited.

The contract of insurance was made a part of the contract of carriage, and Manu shows that Indians had even anticipated the doctrine of average and contribution.

Freight was fixed according to season and was expected to be reasonable in the case of marine transport which was then very much at the mercy of winds and elements.

Travelers by sea and land were very much exposed to the risk of losing their vessels and merchandise because the piracy on the open seas and highway robbery of caravans were very common.

Besides there were several risks. Many times, it might have been captured by the king’s enemies or robbed by pirates or got sunk in the deep waters.

The risk to owners of such ships were enormous and , therefore, to safeguard them the marine traders devised a method of spreading over them the financial loss which could not be conveniently borne by the unfortunate individual victims.

To co-operative device was quite voluntary in the beginning, but now in modern it has been converted into modified shape of premium.

The marine policies of the present forms were sold in the beginning of fourteenth century by the Brugians.

On the demand of the inhabitants of Burges, the Court of Flanders permitted in the year 1310, the establishment in this Town o a charter of Assurance, by means of which the merchants could insure their goods, exposed to the risk of the sea.

The insurance development was not confined to the Lombards and to the Hansa merchants, it spread throughout Spain, Portugal, France, Holland and England.

The marine form and land lending prominence of Lombards merchants got a prominent section of the London City.

They built homes there and took the name of Lombard Street.

Later on, this street became famous in insurance history. The Lloyd’s coffee-house gave an impetus to develop the marine insurance.

2. Fire Insurance

After marine insurance, fire insurance developed in present form.

It had been observed in Anglo-Section Guild form for the first time where the victims of fire hazards were given personal assistance by providing necessaries of life.

It had been originated in Germany in the beginning of sixteenth century.

The fire insurance got momentum in England after the great fire in 1666 when the fire losses were tremendous. About 85 per cent of the houses were burnt to ashes and property worth of sterling ten crores were completely burnt off.

Fire Insurance Office was established in 1681 in England.

With colonial development of England, the fire insurance spread all over the world in present form ‘Sun Fire Office’ was successful fire insurance institution.

In India, the general insurer started working since 1850 with the establishment of the Triton Insurance, Calcutta.

Again in 1861, the North British and Mercantile catered the requirements of insurance business.

The general insurance in India could not progress much. The slow growth of joint-stock enterprise and merchandise production was another reason for the low level of general insurance business.

3. Life Insurance

Life insurance made its first appearance in England in sixteenth century, the first recorded evidence in England being the policy of life of William Gybbons on June 18, 1653.

Even before this date, annuities had become quiet common in England, and marine insurance had, in fact, made its appearance three thousand years ago.

The life insurance developed at ‘Exchange Alley’. The first registered life office in England was the Hand-in-Hand Society established in 1696.

The famous ‘Amicable Society for a Perpetual Assurance Office started its operation since 1706.

Life insurance did not prosper in United States during the 18th century, because of serious fluctuations in death-rate, but soon after 1800 some active interest began to be shown in this enterprise because of the application of level premium plan which had by then been in operation in U.K. for more than a generation.

In India, some Europeans started the first life insurance company in Bengal Presidency, viz., the Orient Life Assurance Company in 1818.

The year 1870 was a year of a landmark in the history of Indian Insurance separating the early period of pioneering attempts at life insurance from the subsequent period of steady development at the establishment of Indian Life Office, viz, Bombay Mutual Life Assurance Society in 1871.

The next important life office was Oriental Government Security Life Assurance Co, Ltd, which started its operation since 1874.

Since then several offices developed in India.

4. Miscellaneous Insurance

The miscellaneous insurance took the present shape at the later part of nineteenth century with the industrial revolution in England.

Accident insurance, fidelity insurance, liability insurance and theft insurance were the important form of insurance at that time.

Lloyd’s Association was the main functioning institution. Now, insurances such as cattle insurance, crop insurance, profit insurance, etc. are taking place.

The scope of general insurance is increasing with the advancement of the society.