You may never have wondered about how the insurance policy came to be, but the facts of the evolution are interesting. The fundamental principles are founded in basic human nature. Things happen and societies need to implement ways to deal with problems when they do happen.

The first evidence of insurance dates back to 5000 BC, when Chinese boat operators found it advantageous to redistribute their cargoes to several boats as they approached treacherous rapids on the rivers. If one boat was lost, all the boat owners shared the loss and no one was wiped out.

The first basic insurance policy emerged from the Code of Laws written by Hammurabi, king of Babylon (1792-1750 BC). These ancient laws—282 total—were extreme in most respects, (e.g. eye for an eye/tooth for a tooth) but from the laws came the realization that there was a need for a guarantee against loss, and who would give that guarantee. The early policy had to do with the protection of goods that were delivered and received by caravans. The policy was paid by the traders in the form of a loan to guarantee the safe arrival of their goods. Of course, these caravans faced the same kind of perils our transportation industry faces today—like robbery, bad weather and breakdowns. The first actual insurance contract required that policies be signed by individuals or in groups where each had to write his or her name and the amount of risk he or she was willing to assume under the insurance proposal. That is how the term underwriter came about.

The origins of insurance are rooted in a form of business owner insurance. Shrewd business people devise ways of protecting their investments. As time moves on and economic systems become more complex and specialized, the kinds of insurance associated with doing business also become more complex and specialized. To keep up, business owners need to make sure they are properly covered for their business property, business personal property, business income protection when there is a loss, seasonal and annual increases in coverage. Also available for additional premiums are optional coverage/endorsements such as employee dishonesty, increases in money and securities, and burglary and robbery. Talk to your agent to make sure that your coverage is sufficient and up to date—and to make sure you have the right policy for your business.

Although not much is written about how insurance agents evolved, they are a significant part of helping people make the right decisions about their insurance coverage. Technology now allows insurance to be purchased on a website, but the importance of face-to-face communication should not be underestimated—I don’t think a “name-your-price gun” can take the place of that… iBi