Insurance Blog likes to educate our readers so today for those of you studying for your ACII Insurance Blogger Kris Oldland discusses the development and history of Insurance.
Part One: Insurance in the ancient world:
Insurance is everywhere and attached to everything we do. In the western world practically each and everyone of us is involved with a number of separate insurance policies everyday and everywhere we go. Whether it be in our cars, in our homes or in our jobs we will no doubt be insured somehow at any given moment. But where did this concept originate and how has it developed over the years to the modern sophisticated system that it is today?
Well, the history of insurance steps back a lot further back than many of us would ever imagine. In fact, throughout history wherever there has been any form of commerce and an economy in place, insurance of some description soon followed.
The earliest recorded descriptions of insurance date back over five thousand years to the third millenia BC, with the Chinese empire having established insurance methods in place. Of course, having invented, paper money, fireworks, and alcohol it was probably best that these clever Chinese chaps came up with insurance too! With a thriving and thoroughly well established trade network developed, the creation of a system of insurance was driven by necessity. Chinese merchants were incredibly tenacious and would make incredible journeys, often overcoming treacherous terrain and dangerous river rapids to complete their journey. It became standard practice for these merchants to redistribute their valuable wares across a number of vessels to limit the loss of any one vehicle capsizing. Essentially, risk management in its purest, most simplistic form.
As we fast forward a millenia or so we encounter another bunch of rather clever folks who were off having a great old civilised time, whilst we in Britain were tentatively stepping out of caves, the Babylonians. This Mesopotamian civilisation flourished amongst both the Sumerian and Akkadian peoples and again was a sophisticated and complex society with commerce beating at its heart. This was a civilisation with an incredibly well organised government, an established, functioning bureaucracy, and complex taxation systems, much of which was installed by the sixth king of Babylon, Hammurabi.
Having brought stability to the Mesopotamian region, it was Hammurabi who introduced the groundbreaking (yet slightly unimaginatively and rather egotistically named) Codes of Hammurabi; one of the first ever recorded codes of law. It was in fact from the Codes of Hammurabi that the phrase “an eye for an eye a tooth from a tooth” originated. The Code also contains the first written reference to insurance within a legal setting, outlining the insurance systems that the Babylonians had in place.
It was a common practice for merchants to take a loan from a more wealthy merchant or nobleman to fund their shipments and often when taking the loan the merchant would make an additional payment in exchange for the lender’s guarantee that should the shipment be lost or stolen then the loan would be canceled. Within the Codes of Hammurabi, it became law that in such a situation the merchant would have to declare in court (and before God) their losses and then the state would reimburse them.
This Babylonian law is often acknowledged as the very first true emergence of insurance and commercial insurance as we understand it today and in fact it spread out amongst most of the early sea faring merchants of the Mediterranean, establishing itself among numerous communities as an integral element of a merchants rights.
In the next installment of this series we shall explore further into how insurance in the Mediterranean further developed under the classic culture of the ancient Greeks. Ultimately establishing both Athenian maritime loans and the Rhodian sea law of general average as the first example of boat insurance.