Everyone knows what life insurance or property insurance is and usually knows something about how it works but not everyone knows the history and reasons for and behind insurance in general. In the most basic sense, insurance is the compensating of a person or business for a loss. There are many types of insurance to cover any situation including, auto insurance, health insurance, dental insurance, home insurance, personal insurance and even pet insurance.
A type of Property Insurance first became popular about 3000 BC in China. Chinese merchants, as well as their investors, wanted to ensure that they would see a profit from their goods that they shipped overseas. In the event that a ship was lost at sea or pirated, an insuring partner would reimburse the owners of the ship and goods. To pay for the loss the merchant would be sold into slavery to the insurer until the debt was repaid. This was a mutually beneficial arrangement since a merchant could not afford to pay for the lost goods or even to buy a ship unless someone invested. The merchant could become very rich and even own a fleet of ships if he was successful.
Of course property insurance wasn't just available in China. In Babylon merchants and investors devised a system of contracts in which the supplier of money for a trade venture agreed to cancel the loan if the trader was robbed of his goods. The trader who borrowed the money paid an extra amount for this protection in addition to the usual interest. As for the lender, collecting these premiums from many traders made it possible for him to absorb the losses of the few. This arrangement proved to be more appealing and sensible than the earlier one. Later this series of contracts was extended to include provisions for a family's home and even covered murder, the start of life insurance.
Of course news of a good idea spread fast. Soon the Phoenicians and to the Greeks, Hindus and Romans also had similar concepts in place. Each culture had it's own interesting twist on the laws. For example the Roman's had a "jettison" law which stated that if a ship's crew had to lighten the ship by throwing things overboard then the loss would be split between the merchant and the insurer. In fact, this law still exists today as part of our own laws for protection against losses at sea and the very word "insurance" is derived from the Latin word for "security."
