The origins of the concept of insurance can be traced back to the ancient Chinese. It was there theowners of cargo ships would meet with investors before setting sail to the new colonies across the Atlantic Ocean. The owners of these ships would occasionally lose a ship either by sinking or priacy. The group of investors took the gamble of insuring the ship and cargo would arrive safely in exchange for a premium consideration.
Marine Insurance is as old as marine trade and has existed in various forms dating back to 3000 BC. Early merchants trading on China's rivers practiced a form of loss control by deliberately spreading a given cargo among several vessels, thereby reducing the potential loss.
It is in the ancient civilization of Babylon, however, that we find the earliest record of insurance in the form of "bottomry." The Code of Hammurabi (c. 2100 BC) sets bottomry, or the advance of money on the security of a vessel to protect against the loss of the cargo by marine perils, at 20%. Traders, whose cargoes were advanced by merchants were thus protected from debt in the event that the cargo was lost. This practice continued throughout the Mediterranean region and was further emphasized in an edict by the Roman Emperor justinian, who restricted the interest money advanced to bottomry to 12%.
Another marine insurance term found in ancient time is General Average. The Greek Indian and Phoenecian traders are known to have used the concept, and a written reference to it is made in Rhodian Law (c. 700 BC). "Let that which has been jettisoned on behalf of all be restored by the contribution of all," the law states. "A collection of the contributions for jettison shall be made when the ship is saved."
Marine Insurance is as old as marine trade and has existed in various forms dating back to 3000 BC. Early merchants trading on China's rivers practiced a form of loss control by deliberately spreading a given cargo among several vessels, thereby reducing the potential loss.
It is in the ancient civilization of Babylon, however, that we find the earliest record of insurance in the form of "bottomry." The Code of Hammurabi (c. 2100 BC) sets bottomry, or the advance of money on the security of a vessel to protect against the loss of the cargo by marine perils, at 20%. Traders, whose cargoes were advanced by merchants were thus protected from debt in the event that the cargo was lost. This practice continued throughout the Mediterranean region and was further emphasized in an edict by the Roman Emperor justinian, who restricted the interest money advanced to bottomry to 12%.
Another marine insurance term found in ancient time is General Average. The Greek Indian and Phoenecian traders are known to have used the concept, and a written reference to it is made in Rhodian Law (c. 700 BC). "Let that which has been jettisoned on behalf of all be restored by the contribution of all," the law states. "A collection of the contributions for jettison shall be made when the ship is saved."
Justinian also codifies the concept of General Average, taking it a step further to include the following: "When a ship is sunk or wrecked, whatever of his property each owner may have saved, he shall keep it for himself." This concept was widely used throughout the early civilizations.
The next major development in marine insurance can be traced to the rise of the guilds throughout Europe in the 11th and 12th Centuries. Danish navigators began forming guilds whose role was to indemnify its members against losses at sea.
The same era also finds the first use of premiums in marine insurance. The merchant cities of Lombardy, Venice and Florence were the centers of Mediterranean trade and it is here that written records began to emerge. By 1255, the Merchant State of Venice had embodied the principals of mutual insurance against the loss of pillage through contribution.
The oldest marine policy known to have been issued was on a vessel named Santa Clara, and the oldest policy document in existence was dated April 24, 1384 covering four bales of textiles on a journey from Pisa to Savona.
These basic concepts of marine insurance were brought by the Lombards to northern Europe and England in the 13th Century. By the 17th Century, London, with the emergence of the Lloyd's of London Association, had developed into a leading center for marine insurance.
The well-known Lloyd's of London traces its roots to a coffee shop founded by Samuel Lloyd in 1688 and was favored as a meeting place for the transaction of insurance business amongst underwriters and merchants. By 1734, the official list of vessels and values known as the "Lloyd's List" was first published. More than 250 years later, it continues to serve as the leading shipping list in the marine insurance industry. In 1769, underwriters took their informal arrangement and founded the organization we know today as Lloyd's of London. Ten years later, the first standard policy wording was developed for use at Lloyd's.
Today, Lloyd's of London is still acknowledged as the largest meeting place for underwriters and shippers to transact marine insurance business. In 1906, the British Parliament enacted the Marine Insurance Act. This legislation continues to influence marine insurance policy wordings and conditions.
Auto insurance evolved from the interest marine insurance had in protecting against financial loss. The tort notion of fault is so deeply embedded in previous theories of insurance that auto insurance naturally also came to rest on a fault system. What this means is that if there were an auto accident, it would be determined who was at fault and then liability would be assessed according to that determination. However, since there are irresponsible drivers--or, in other words, drivers who don’t have the financial capacity to pay--it is impossible to ensure that even though fault is assessed, the injured person will be able to collect. Simply put, the problem is that of the uncompensated drivers in a society that is unarguably an auto-centered society (Long 2007).
The tremendous rise the automobile insurance industry is related to a variety of factors, including the expansion of the U.S. economy, the dramatic impact of the automobile on American life, and the rapid growth of its supporting physical and legal infrastructure from road improvement to driver licensing. Indeed, the rise of the “car culture” in the first half of the twentieth century was accompanied by a surprising number of accidents on the roadways (Rossi and Black Jr. 2001). The high rate of accidents on the roads resulted in several political reactions. Beginning in earnest in the early 1920s, the states and federal government increased funds to improve roads and traffic control while also implementing stricter driver and vehicle licensing requirements.
Insurance had always been offered to ease the socio-economic losses associated with transportation, but now because the preferred mode of transportation was the automobile and the number of motor vehicle related fatalities was high, the states began to require that drivers cover the liability they incurred while operating their cars. Perhaps the first move by organized society to deal with the financial results of auto accidents came with the compulsory liability insurance statue in Massachusetts in 1927 with the objective to make all parties financially responsible. Most states would pass similar laws by the 1940s which saw the end of WWII and a rapid increase in the automobile industry, consequently expanding the need for financial responsibility and mandatory insurance coverage laws for motorists. Today all states require automobile insurance.
Auto insurance has become one of the most heavily regulated businesses in U.S. history, and most countries outside the United States also now require motorists to purchase auto insurance before driving on public roads. The penalties for not acquiring insurance can be severe. Usually, the law requires that a motorist have at least third-party insurance to protect others against financial loss caused by the motorist's vehicle, while coverage against damage to the motorist's own vehicle or person is usually optional. In doing this, American insurance laws created an auto accident compensation system based on personal responsibility that simply extended traditional insurance legal principles embodied in tort law to a new technology: the auto (Long 2007).
Marine Insurance is as old as marine trade and has existed in various forms dating back to 3000 BC. Early merchants trading on China's rivers practiced a form of loss control by deliberately spreading a given cargo among several vessels, thereby reducing the potential loss.
It is in the ancient civilization of Babylon, however, that we find the earliest record of insurance in the form of "bottomry." The Code of Hammurabi (c. 2100 BC) sets bottomry, or the advance of money on the security of a vessel to protect against the loss of the cargo by marine perils, at 20%. Traders, whose cargoes were advanced by merchants were thus protected from debt in the event that the cargo was lost. This practice continued throughout the Mediterranean region and was further emphasized in an edict by the Roman Emperor justinian, who restricted the interest money advanced to bottomry to 12%.
Another marine insurance term found in ancient time is General Average. The Greek Indian and Phoenecian traders are known to have used the concept, and a written reference to it is made in Rhodian Law (c. 700 BC). "Let that which has been jettisoned on behalf of all be restored by the contribution of all," the law states. "A collection of the contributions for jettison shall be made when the ship is saved."
Marine Insurance is as old as marine trade and has existed in various forms dating back to 3000 BC. Early merchants trading on China's rivers practiced a form of loss control by deliberately spreading a given cargo among several vessels, thereby reducing the potential loss.
It is in the ancient civilization of Babylon, however, that we find the earliest record of insurance in the form of "bottomry." The Code of Hammurabi (c. 2100 BC) sets bottomry, or the advance of money on the security of a vessel to protect against the loss of the cargo by marine perils, at 20%. Traders, whose cargoes were advanced by merchants were thus protected from debt in the event that the cargo was lost. This practice continued throughout the Mediterranean region and was further emphasized in an edict by the Roman Emperor justinian, who restricted the interest money advanced to bottomry to 12%.
Another marine insurance term found in ancient time is General Average. The Greek Indian and Phoenecian traders are known to have used the concept, and a written reference to it is made in Rhodian Law (c. 700 BC). "Let that which has been jettisoned on behalf of all be restored by the contribution of all," the law states. "A collection of the contributions for jettison shall be made when the ship is saved."
Justinian also codifies the concept of General Average, taking it a step further to include the following: "When a ship is sunk or wrecked, whatever of his property each owner may have saved, he shall keep it for himself." This concept was widely used throughout the early civilizations.
The next major development in marine insurance can be traced to the rise of the guilds throughout Europe in the 11th and 12th Centuries. Danish navigators began forming guilds whose role was to indemnify its members against losses at sea.
The same era also finds the first use of premiums in marine insurance. The merchant cities of Lombardy, Venice and Florence were the centers of Mediterranean trade and it is here that written records began to emerge. By 1255, the Merchant State of Venice had embodied the principals of mutual insurance against the loss of pillage through contribution.
The oldest marine policy known to have been issued was on a vessel named Santa Clara, and the oldest policy document in existence was dated April 24, 1384 covering four bales of textiles on a journey from Pisa to Savona.
These basic concepts of marine insurance were brought by the Lombards to northern Europe and England in the 13th Century. By the 17th Century, London, with the emergence of the Lloyd's of London Association, had developed into a leading center for marine insurance.
The well-known Lloyd's of London traces its roots to a coffee shop founded by Samuel Lloyd in 1688 and was favored as a meeting place for the transaction of insurance business amongst underwriters and merchants. By 1734, the official list of vessels and values known as the "Lloyd's List" was first published. More than 250 years later, it continues to serve as the leading shipping list in the marine insurance industry. In 1769, underwriters took their informal arrangement and founded the organization we know today as Lloyd's of London. Ten years later, the first standard policy wording was developed for use at Lloyd's.
Today, Lloyd's of London is still acknowledged as the largest meeting place for underwriters and shippers to transact marine insurance business. In 1906, the British Parliament enacted the Marine Insurance Act. This legislation continues to influence marine insurance policy wordings and conditions.
Auto insurance evolved from the interest marine insurance had in protecting against financial loss. The tort notion of fault is so deeply embedded in previous theories of insurance that auto insurance naturally also came to rest on a fault system. What this means is that if there were an auto accident, it would be determined who was at fault and then liability would be assessed according to that determination. However, since there are irresponsible drivers--or, in other words, drivers who don’t have the financial capacity to pay--it is impossible to ensure that even though fault is assessed, the injured person will be able to collect. Simply put, the problem is that of the uncompensated drivers in a society that is unarguably an auto-centered society (Long 2007).
The tremendous rise the automobile insurance industry is related to a variety of factors, including the expansion of the U.S. economy, the dramatic impact of the automobile on American life, and the rapid growth of its supporting physical and legal infrastructure from road improvement to driver licensing. Indeed, the rise of the “car culture” in the first half of the twentieth century was accompanied by a surprising number of accidents on the roadways (Rossi and Black Jr. 2001). The high rate of accidents on the roads resulted in several political reactions. Beginning in earnest in the early 1920s, the states and federal government increased funds to improve roads and traffic control while also implementing stricter driver and vehicle licensing requirements.
Insurance had always been offered to ease the socio-economic losses associated with transportation, but now because the preferred mode of transportation was the automobile and the number of motor vehicle related fatalities was high, the states began to require that drivers cover the liability they incurred while operating their cars. Perhaps the first move by organized society to deal with the financial results of auto accidents came with the compulsory liability insurance statue in Massachusetts in 1927 with the objective to make all parties financially responsible. Most states would pass similar laws by the 1940s which saw the end of WWII and a rapid increase in the automobile industry, consequently expanding the need for financial responsibility and mandatory insurance coverage laws for motorists. Today all states require automobile insurance.
Auto insurance has become one of the most heavily regulated businesses in U.S. history, and most countries outside the United States also now require motorists to purchase auto insurance before driving on public roads. The penalties for not acquiring insurance can be severe. Usually, the law requires that a motorist have at least third-party insurance to protect others against financial loss caused by the motorist's vehicle, while coverage against damage to the motorist's own vehicle or person is usually optional. In doing this, American insurance laws created an auto accident compensation system based on personal responsibility that simply extended traditional insurance legal principles embodied in tort law to a new technology: the auto (Long 2007).
