Thursday, January 14, 2010

Evolution of Inurance

Understanding the risk and overpowering the same was the basic acumen that mankind gained since the time of Neanderthals probably. There is no reason to doubt that the concept of Insurance would not have been there since the time immemorial, when the civilizations evolved and shaped up in human history. The endeavour to neutralize risk by man is as old as man itself.

In Indian context we may find traces of description of Concept of Insurance in our ancient scriptures, defining it as pooling in of resources so as to re-align the same to face calamities like flood, famine, fire, epidemics, war and other natural disasters. Some noted doctrines are Arthshastra by Kautilya, Manusmriti by Manu and Dharmshastra by Yagyavalk. In simple terms we may understand
our age old joint family system was in place as an unwritten protection to all the members in the family by head of the family.

All the civilizations and societies across the globe recognized the phenomenon of insurance in some form or the other and pursued it accordingly. Be it Greek, Mexican, Iranian, Persian, Egyptian, Cambodian or Assyrian, there are mention of Insurance in their writings. Some of the ancient dynasties like Achaemenian Monarch in Iran recognized insurance and supported that their people should be insured.

There are reasons to believe that primarily it was fire, calamities and international trade through oceans that crystallized the fundamentals of initial insurance practices as all such civilizations evolved near the waters and were involved in trade through sea.

In medieval times, Insurance business is traced back to the city of London. Marine business was instrumental to formulate and propagate Insurance business. It was a time when marine was the lifeline of the International trade and was exposed to severe risks. Rough weather resulting in the sinking of ships, damages of goods in the high seas, robbery by pirates and capturing of ships by enemies were the factors which were potential threats to the merchants.

Therefore, a concept gradually evolved where Marine traders started the practice of gathering together where they used to agree to share the losses of goods during transportation by ship on pre-defined terms and conditions. Lloyd's Coffee House in London has witnessed the evolution and progress of such meeting which undoubtedly were the foundation of modern insurance business.

The first insurance policy was issued in England in the year 1583 and modern insurance business took off from there.

1 comment:

  1. Great to have enlighten us on the evolution of history. Agreed that insurance must have existed since ages and it has evolved gradually covering all sorts of risks today.