History of General Insurance

Middle East

The Babylonians developed a system which was recorded in the Code of Hammurabi,c.1750BCE, and practiced yearly by Mediterranean sailing merchants. Traders were encouraged to assume the risks of the caravan trade through loans that were paid (with interest) only after the goods had arrived safely. It was used by the ancient Greeks and provided that a ship not returning to port is absolved of any debt on the ship itself or on its cargo. (A type of Bottomry-Under maritime law,abottomry is a contract by which venture capital for a voyage is advanced, with the ship as security-for an extra charge the lenders would agree to forgive the loan in the event of the ship not returning to port due to some unforeseen specified peril).

Trade was very extensive. A common way of doing business was for a merchant to entrust goods or money to a traveling agent, who sought a market for his goods. The caravans traveled far beyond the limits of the empire.The agent was not responsible for loss by robbery or extortion on his travels.

Code of Hamurabi
23.If the robber is not caught, then shall he who was robbed claim underoath the amount of his loss then shall the community, and… onwhose ground and territory and in whose domain it was compensate him for the goods stolen.

24.If persons are stolen, then shall the community and… pay one mina of silver to their relatives.

48.If anyone owe a debt for a loan, and a storm prostrates the grain, or theharvest fail, or the grain does not grow for lack of water in that year he need not give his creditor any grain, he washes his debt-tablet in water and pays no rent for this year.

02. If a merchant entrust money to an agent (broker) for some investment, and the broker suffer a loss in the place to which he goes, he shall make good the capital to the merchant.

125. If any one place his property with another for safe keeping, and there, either through thieves or robbers, his property and the property of the other man be lost, the owner of the house, through whose neglect the loss took place, shall compensate the owner for all that was given to him in charge. But the owner of the house shall try to follow up and recover his property, and take it away from the thief.

126. If any one who has not lost his goods state that they have been lost, and make false claims: if he claim his goods and amount of injury before God, even though he has not lost them, he shall be fully compensated for all his loss claimed. (I.e., the oath is all that is needed.)

126. If any one who has not lost his goods state that they have been lost, and make false claims: if he claim his goods and amount of injury before God, even though he has not lost them, he shall be fully compensated for all his loss claimed. (I.e., the oath is all that is needed.)

229 If a builder build a house for some one, and does not construct it properly, and the house which he built fall in and kill its owner, then that builder shall be put to death.

232. If it ruin goods, he shall make compensation for all that has been ruined, and inasmuch as he did not construct properly this house which he built and it fell, he shall re-erect the house from his own means.

236. If a man rent his boat to a sailor, and the sailor is careless, and the boat is wrecked or goes aground, the sailor shall give the owner of the boat another boat as compensation.

237. If a man hire a sailor and his boat, and provide it with corn, clothing, oil and dates, and other things of the kind needed for fitting it: if the sailor is careless, the boat is wrecked, and its contents ruined, then the sailor shall compensate for the boat which was wrecked and all in it that he ruined.

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800 BCE – Rhodian Law
A thousand years later, the inhabitants of Rhodes invented the concept of the general average. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were jettisoned during storm or sinkage.

1063 – Amalfi Sea Code – Italy
In 1063, merchants in the trading port of Amalfi introduced what became known as the Amalfi Sea Code. Under the Code any merchant whose ship was lost was reimbursed from a pool of money all members contributed to. The Code held sway throughout the Mediterranean for over 500 years.

1300’s CE – Italy
In fourteenth century Italy merchants insured their goods in transit on sea and land. This was probably introduced into England by the Lombards who had a strong influence on the mercantile life of England.

1347 – Genoa – earliest known contract of insurance

By the middle of the 14th cent., as evidenced by the earliest known insurance contract (Genoa, 1347), marine insurance was practically universal among the maritime nations of Europe.

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Northern Europe

1310 CE – Brugge
With the growth of towns and trade in Europe, the medieval guilds undertook to protect their members from loss by fire and shipwreck, to ransom them from captivity by pirates, and to provide decent burial and support in sickness and poverty

In 1310, in the Flemish town of Brugge, a Chamber of Insurance was established to perform operations to protect the property interests of the merchants and the craft guilds.

1598 CE – Amsterdam
An insurance ordinance written.

1670’s – Germany
German Guilds in Hamburg united in a Municipal Insurance Company. This group set standards for classification of risks, annual premiums based on amounts insured and a maximum amount insurable.

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1565 CE – Royal Exchange founded
The method of effecting an insurance in England was to go to a place where merchants gathered together to transact their business (for example the Royal Exchange) and obtain the services of a broker, who would approach wealthy clients to take a share of the risk in exchange for a premium.

1574 CE – Chamber of Insurance
In 1574, Elizabeth I granted permission to Richard Candaler to establish Chamber of Insurance to register all insurance transactions in London.

1666 CE – Great Fire of London
Until the middle of the seventeenth century the bulk of Insurance effected was for marine or transit risks. It was not until after the Fire of London in 1666 that the need for Fire Insurance was brought home to the citizens of London.

The Great Fire of London in 1666 heralded the beginnings of the loss adjusting profession. It is believed, with the introduction afterwards of fire insurance on buildings, independent surveyors and builders were soon relied on for their expertise in settling claims.

Fire of London
The 2nd Great Fire of London in 1666 started in a bakers shop in Pudding Lane, at 2 in the morning. The resulting blaze lasted for 3 days. >By the end of the fire some four fifths of the City had been destroyed, approximately 13,200 houses, 87 churches and 50 Livery Halls over an area of 436 acres. Only 6 people are definitely known to have been killed. However, it seems likely that the actual death toll was much higher. In destroying the close packed houses and other buildings it is also likely that the fire finally put an end to the Great Plague that had devastated the city in the previous year – killing 17,440 out of the population of 93,000. The Royal Exchange was also destroyed by the fire.

1680 CE – First Fire Insurance Companies
In the year 1680 an advertisement appeared in the press for a company known as “Fire Office”. It read “There is a new office to be kept at the backside of the Royal Exchange, London, and will be opened on Thursday next. They do undertake for a reasonable rate to secure the houses in London and the suburbs thereof from fire, and if burned down to build them again at the cost of the office…..”

1688 CE – Lloyds
In the late 1680s, Mr. Edward Lloyd opened a coffee house which became a popular haunt of ship owners, merchants, and ships&#8217 captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures.

1680 to 1720 CE &#8211 New fire insurers in London
The next forty years saw the formation of a number of other companies, most of which conducted their Fire Insurance activities in the City and Suburbs of London. When fire insurance first appeared in Britain, mutual societies, in which each policyholder owned a share of the risk, predominated.

1720 CE &#8211 First Stock Insurance companies
The first stock companies to engage in insurance were chartered in England in 1720, and in 1735

1720 CE &#8211 Agencies in the provinces
It was apparently not until the end of 1720 that consideration was given to the enlargement of their sphere of activities by the appointment of agents in the provinces.

Companies employed “Walkers” who were salaried officials and whose duty it was to collect premiums and hand over new policies, presumably at the same time they canvassed for new business. This seems to have been the birth of the Insurance Inspector.

In the minutes of one of the Chartered Companies dated May 31st, 1721. “It is the opinion of the Committee that as many of the Country Post Masters as are proper, be applyed to serve the Company as correspondents.”

1760 CE &#8211 Industrial Revolution
expansion of agencies Agency development in the first half of the eighteenth century seems to have been slow as by 1760 the number of agencies for one of the leading companies hardly exceeded a score. With the coming of the Industrial Revolution the agency representation of the same Office showed rapid expansion and by the beginning of the nineteenth century stood at over three hundred, covering most of the cities and important towns of the United Kingdom.

Agents were, where possible, chosen from the professional classes e.g. Solicitors, Bankers and Land Agents.

The appointment in legal terms was that of “General” Agent, the appointee having authority to act for his principals in all matters of Insurance. The Office was expected to survey risks, assess values and apply rating within certain fixed limits. His duties also included reporting to his Office on all fires in his locality whether or not the property was insured with them. The settlement of claims was also left in his hands and he had authority to make disbursement out of funds in his possession.

For all these activities and for collecting Stamp duty on the policies he received 10% of Fire premiums and duty. A special allowance was made to him if he had a fire engine and we see in one Company’s records that the undermentioned allowance was made in 1834 to one of its Irish Agents:

  • For horse £42 per annum
  • For Messenger £26 per annum

The agent was granted the sole representation of the Office in his area and in return was not allowed to hold any other insurance agency. As considerable sums of money passed through his hands and very little supervision could be exercised he had to find sureties for amounts varying from £100 to £1,000 depending on the volume of business passing through the agency.

The Industrial Revolution
Started in England. The first factories appeared in 1740, concentrating on textile production.

In 1740 the majority of English people wore woolen garments, but within the next 100 years the scratchy, often soggy and fungus-filled woolens were replaced by cotton especially after the invention of the cotton gin by Eli Whitney, an American, in 1793.

Such English inventions as the flying shuttle and carding machines of John Kay, the water frame of Richard Arkwright, the spinning jenny of James Hargreaves, and the improvements in weaving made by Samuel Crompton were all integrated with a new source of power, the steam engine, developed in England by Thomas Newcomen, James Watt, Richard Trevithick, and in the U.S. by Oliver Evans.

Within a 35 year period, from the 1790s to the 1830s, more than 100,000 power looms with 9,330,000 spindles were put into service in England and Scotland.

Late 1700&#8217s
By the late eighteenth century, the major fire offices were appointing “Assessors” to act for them exclusively and a number of today’s leading loss adjusting firms can trace their roots back to these early days of the emerging profession.

1800&#8217s CE &#8211 Branch offices
With the great expansion of trade in the middle of the nineteenth century and the consequent industrialization, Fire Insurance became much more complicated. The knowledge of Insurance matters of the ordinary agent was not sufficient to deal with the mass of technical detail. The companies started to open branch offices in the cities and big towns of the United Kingdom and manned them with trained staff whose sole business was Insurance. It is true that in some cases the agent became the first Branch Manager but this was the exception rather than the rule.

The effect of this change of policy was to curtail considerably the power of the agent and reduce the scope of his duties to what they are today. From being a “General” agent with power to act for his principals in all matters he became a “Special” agent with authority only within a limited sphere while the Branch Office dealt with such aspects as rating, surveys and claims.

1850 CE &#8211 Distribution model settled
Since about 1850, there have been only detail changes in the organisation of the agency system of most offices general principle remaining unaltered. In 1865, the Fire Offices Committee had a list of “approved” brokers and the inference is that member offices dealt only with those enumerated.’

1941 CE &#8211 use of the word Adjuster
The word “Adjuster” appears to have been first used in 1941 with the founding of the Association of Fire Loss Adjusters in the U.K. This was a grouping of prominent claims experts who found themselves actively involved at a time when the nation was suffering from enormous fire damage as a result of bombing.

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North America

1735 CE &#8211 First U.S. Insurance Company
The earliest American fire insurers were mutual societies. Established in the few urban centers where capital was concentrated, American mutuals were not considered money-making ventures, but rather were outgrowths of volunteer firefighting organizations. In 1735 Charles Town (modern-day Charleston), South Carolina residents formed the first American mutual insurance company, the Friendly Society of Mutual Insuring of Homes against Fire. It only lasted until 1741, when a major fire put it out of business.

Fire insurance corporations were formed in New York City (1787) and in Philadelphia (1794)

1752 CE &#8211 U.S.
Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin’s company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses.

For more detailed information refer to Fire Insurance in the United States by Dalit Baranoff

1804 CE &#8211 First Canadian insurer
The Phoenix Assurance Company opened an office in Montreal in 1804. Five years later a group of Halifax businessmen, formed the Halifax Fire Insurance Association. It would become the Halifax Insurance Company in 1819, the same year that Quebec’s first domestic insurer, the Quebec Fire Insurance Company, was formed.

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Insurance Act of Manitoba

Currently being reviewed.

The Insurance Act covers all types of insurance (excluding marine). The Act goes back to 1932.

The 1932 Act repealed six separate Acts. These were:

  1. The Manitoba Insurance Act, chapter 98 of Revised Statutes of Manitoba, 1913, which regulated insurance companies
  2. The Life Insurance Act, chapter 99 of the Consolidated Amendments, 1924
  3. The Accident and Sickness Insurance Policy Act, chapter 104 of the Consolidated Amendments, 1924
  1. The Automobile Insurance Policy Act, chapter 106 of the Consolidated Amendments, 1924
  2. The Fire Insurance Policy Act, chapter 103 of the Revised Statutes of Manitoba, 1913 and
  3. The Hail Insurance Policy Act, chapter 107 of the Consolidated Amendments, 1924.

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