The Evolution of Insurance: From Hammurabi to Healthcare

Do you consider yourself to be the gambling type?  No?  Well, do you have insurance?  Gambling, in essence, is a game of risk.  In the grand scheme of things, life is also a game of risk.  The broad concept of insurance is that of risk management.  Consider any life risk: a car accident, a broken pipe in the basement that leads to flooding, or even a trip to the doctor’s office. Would you go sail your boat without first visiting a website like this?  Would you be willing to bet that these things will not happen?  Since these occurrences are unplanned (has anyone scheduled a date for a car accident?), humans derive a sense of safety and comfort knowing that just in case something were to happen, they are insured against it to a certain degree.  However, insurance is not a modern invention.  In fact, it has existed perhaps as long as human society has existed.


Origins of Insurance


Since the concept of insuring yourself against calamity is a natural human response, you might say that insurance developed along with human civilization.  The famous Babylonian leader King Hammurabi, who lived in the 18th century BC, compiled written laws for his people in what has come to be known as the Code of Hammurabi.  The Code provided basic forms of insurance, mostly for debtors.  For example, a merchant who had taken out a loan to finance a trading expedition could pay an extra fee to the lender.  This extra fee, which would correspond to today’s premium, obligated the lender to cancel the merchant’s debt should the expedition meet with sudden, unforeseeable catastrophe (dust storms or rough seas, for example).


In ancient Greece and Roman societies, “benevolent societies,” which were a type of guild or trade association, cared for the families of deceased members.  These organizations demonstrate the insurance principle of spreading risk, so each member would only have to contribute a little to make up for a large deficit.  This, in essence, is what modern policyholders do when they pay a premium.


The development of modern property insurance may be traced back to the Great Fire of London in 1666.  Since most houses and businesses were constructed of wood, nothing could prevent the fire from leaping quickly from building to building.  After the devastation, the Insurance Office for Houses provided fire insurance to residents.


Insurance and the Rise of Mercantilism


Insurance policies as we know them today arose from a burgeoning mercantile system.  Investors, traders, and business owners wanted to protect their investments.  Blaise Pascal and Pierre de Fermat’s work on probability led to the creation of the first actuary tables, which are used to determine insurance rates.  In the United States, Benjamin Franklin encouraged the adoption of insurance for property protection.  However, the basic plans offered by early insurance providers differ greatly from insurance policies offered today, although they still share the same basic characteristics and principles.


Major Types of Insurance and the Best Place in Florida to Get them


  • Auto Insurance

Auto Insurance protects the policyholder from costs related to vehicular incidents.  This may include the cost of repairing a damaged vehicle, the cost of medical treatment stemming from the incident, and any legal fees that the policyholder may incur.


  • Health Insurance

Health insurance covers the costs of medical treatment.  Often, these plans require the policyholder to pay either a nominal fee for each visit or treatment (this is called a copay), or the policyholder must pay for everything out of pocket up until a certain amount is reached (this is the deductible).  After the deductible is met, the insurance generally covers all other costs for the rest of the year.


  • Life Insurance

Life insurance provides a monetary benefit to a designated person or group of persons after the death of the policyholder.  Insurance companies use tables based on those developed by Pascal and Fermat to determine mortality rates.  This, in turn, decides the price of the insurance premium.


  • Property Insurance

Property insurance covers a variety of disasters that can damage property of many different types.  Property insurance may be quite general, protecting a homeowner from burst pipes or fallen tree limbs, or quite specialized, protecting against volcanic eruptions.


  • Specialized Types of Insurance

Most of these types of insurance would not have been necessary when the concept of insurance first began.  For example, pet owners may insure their pets, owners of stud farms may insure bloodlines, and farmers may insure their farm animals. More common types of specialized Insurance include
Boat Insurance ,
Motorcycle Insurance , and
RV Insurance


Choosing Insurance


Persons who purchase insurance regularly pay a premium, or fixed amount set by the company and calculated by various algorithms, to ensure continued coverage.  It is possible that you will never have a natural disaster affect your home, for example.  However, you must also seriously consider if you have the means to recover from a loss.  This leads to individual consumers weighing the odds of an event occurring against the need to pay a monthly premium.  Many people looking to save money by not having certain types of insurance may find that they end up spending more money in the long run if a catastrophe occurs.  When it comes to more specialized types of insurance, many would simply not apply to the general consumer.  However, we must all realize that life involves risk, and the insurance coverage we purchase, whether it be basic or complex, must cover our individual needs and risks.