Monday, October 6, 2008

A History of Insurance (part 2)

The Phoenicians, Greeks and Indians took another major step in laying the foundations for today’s insurance industry when they developed insurance against a ship’s sinking. When a group of shipowners financed a commercial voyage, they borrowed money from a lender, using the ship as collateral. If the voyage was successful, the shipowner repaid the loan at a high rate of interest. If the ship was lost, the shipowner was free of the debt (Al-Hanis 1979: 66).

Ancient Romans had both life and health insurance. The Collegia, Roman benevolent societies, provided burial insurance and financial help for the sick and aged. Roman guilds issued life insurance contracts for members and by AD 200, the Romans had a rough mortality table. The Roman military also had health and disability plans (ibid.).

When guilds arose in Flanders and Holland, among the services they provided were sickness benefits and burial fees. Some guilds made efforts to reimburse members for fire losses. Although their methods of operation were unsophisticated by today’s standards, they popularized insurance (ibid.). During this period, insurance was underwritten mainly by individuals and guilds. Benefits were relatively low; one person or a small group could have enough capital to conduct insurance business. The person selling insurance was called
an underwriter, signing his name and the amounts of liability at the bottom of the page (Rahman and Gad 1978: 35).

Ibn-Khaldon, in his Muqaddimma (Preface) has written about Arab business ventures which were then known as Winter and Summer Voyages. The voyagemembers indemnified any member of the group against loss of either their stock or their profit. All members of the voyage paid a percentage either of their profit or capital as compensation for the loss or damage sustained by any member of the voyage.

Also read: A History of Insurance (part 1)

1 comment:

  1. Wow. I always wanted to know how insurance came into picture. How people felt the need for insurance ? You have completely explained the history of insurance on this blog. Thanks.
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