History of Insurance in India (The Insurance Act of 1938)

In 1937, the government of India set up a consultative committee. Sushil C. Sen, a well-known solicitor in Calcutta, was appointed the chair of the committee. He consulted a wide range of interested parties, including leaders within the insurance industry. It was debated in the legislative assembly, and, finally, in 1938, the Insurance Act was passed. This was the first comprehensive piece of legislation in India, covering both life and general insurers.

It covered deposits, supervision of insurers, investments, commissions of agents, and directors appointed by the policyholders, among other topics. This piece of legislation lost significance after life insurance was nationalized in 1956, and general insurance was nationalized in 1972. With the privatization in the late twentieth century, the Insurance Act of 1938 returned as the backbone of current legislation of insurers.

To implement the 1938 Act, an insurance department was established in the Ministry of Commerce by the government of India; later it was transferred to the Ministry of Finance. One curious element of the Act's classification of lines of insurance business was its inclusion of automobile insurance in the "miscellaneous" category. Later in the century, automobiles became the largest single item of general insurance. However, it continued to be included in the miscellaneous category, making it difficult to delineate the effects of losses due to pricing that drove this sector. For example, the Tariff Advisory Committee effectively fixed prices for a number of general insurance lines of business. Most premiums were below what would have been actuarially fair (especially for auto), but reporting auto insurance under the miscellaneous category masked this underpricing.

When the market was opened again to private participation in 1999, the earUer Insurance Act of 1938 was reinstated as the backbone of the current legislation of insurers, as the Insurance Regulatory and Development Authority Act of 1999 was superimposed on the 1938 Insurance Act. This revival of the earlier legislation has created a messy problem in that the Insurance Act of 1938 explicitly forbade insurers to participate in other financial services activities such as banking.

By 1956, there were 154 Indian life insurers. There were 16 non-Indian insurers, and 75 provident societies were issuing life insurance policies. Most of these policies were centered in the big cities of Bombay, Calcutta, Delhi, and Madras.

History of Insurance in India (Colonial Era)

Life insurance in the modem form was first set up in India through a British company called the Oriental Life Insurance Company in 1818, followed by the Bombay Assurance Company in 1823 and the Madras Equitable Life Insurance Society in 1829. All of these companies operated in India but did not insure the lives of Indians. They insured the lives of Europeans living in India.

Some of the companies that started later did provide insurance for Indians, but they were treated as "substandard." Substandard in insurance parlance refers to life insurance for people with physical disability. In this case, the common adjustment made was a "rating-up" of five to seven years to the normal life expectancy of a British person in India. This meant, treating q(x), the (conditional) probability of dying between x and x + 1, for an x-year-old Indian male as if it was q(x + 5) or q(x + 7) of a British male. Therefore, Indians had to pay an ad hoc extra premium of 20 percent or more. This was a common practice of European companies that were
operating in Asia or Latin America.

The first company to sell policies to Indians with "fair value" was the Bombay Mutual Life Assurance Society starting in 1871. The first general insurance company, Triton Insurance Company Ltd., was established in 1850. It was owned and operated by the British. The first indigenous general insurance company was the Indian Mercantile Insurance Company Limited, established in Bombay in 1907. At the time, insurance business was conducted in India without any specific regulation. Insurers were subject to the Indian Companies Act of 1866, but the insurance industry was otherwise unregulated.

After the start of the "Be Indian Buy Indian" movement (called the Swadeshi movement) in 1905, indigenous enterprises sprang up in many industries. Not surprisingly, the movement also touched the insurance industry, leading to the formation of dozens of life insurers along with provident ftind companies (pension ftinds).

In 1912, two sets of legislation were passed: the Indian Life Assurance Companies Act and the Provident Insurance Societies Act. There are several striking features of these legislations. First, they were the first legislations in India that particularly targeted the insurance sector. Second, they did not apply to general insurance, because the government did not feel the necessity to regulate general insurance. Third, they restricted activities of Indian insurers but not foreign insurers, even though the legislation was modeled after the British Act of 1909.

Comprehensive insurance legislation covering both life and non-life business did not materialize for the next 26 years. During the first phase of these years, Great Britain entered World War I—an event that disrupted all legislative initiatives. Later, Indians demanded freedom from the British. As a concession, India was granted "home rule" through the Government of India Act of 1935, which provided for legislative assemblies for provincial governments as well as for the central government. But supreme authority of promulgated laws remained with the British
Crown.

The only significant legislative change before the Insurance Act of 1938 was Act XX of 1928. It enabled the government of India to collect information about (1) Indian insurers operating in India, (2) foreign insurers operating in India, and (3) Indian insurers operating in foreign countries. The last two elements were missing from the 1912 Insurance Act. Information thus collected allows us to compare the average face value of Indian insurers to their foreign counterparts. In 1928, the average policy value of an Indian company was U.S. $619 compared to $1,150 for foreign companies (Indian Insurance Commissioner's Report, 1929, p. 23).

Foreign insurers were doing well during that period. In 1938, the average size of the policy sold by Indian companies had fallen to U.S. $532 (compared to $619 in 1928), and that of foreign companies had risen somewhat to $1,188 (in 1928, the average size was $1,150).

History of Fire Fighting (part 2)

After this incident, stronger measures were enforced to ascertain that the insurance companies covering losses due to fire were not overdoing insurance to more than they were capable of covering in the near future. Laws were also enforced and put into practice pertaining to this topic.

Uniformity in the practices being followed by the firefighters and to establish a congruency between fire prevention and fire insurance was felt. This led to the formation of National Board of Fire Underwrites which was founded in 1866, and was responsible for looking into matters pertaining to fire losses, how insurance companies covered them and to catch defaulters, if any.

This led to a win-win situation for the firefighters, the insurance companies and the general public wherein, none of the three parties involved in arson, conflagration or a natural fire could be duped by any of them. Later, this union, which was composed of many companies and dealers joined hands together and formed what is known as the Insurance Service Office today. The ISO is headquartered at Jersey City, New Jersey and contain more than 11 billion insurance records as of today.

Fire and firefighters have been put to test time and again and the Great Chicago fire in 1871 and the forest fire at Wisconsin the following year were two such situations. These two incidents led to 1/4th of the insurance companies and firefighting houses to become defunct and was a huge blow to the morals of the firefighting administration as a whole in the US.

One incident which led to the modification of existing rules on how to prevent fires and what kind of signs and preventive measures to be used was the Iroquois Theatre Fire in Chicago, Illinois in December 1903, which killed more than 600 people. Supposedly, the building was totally fireproof according to the existing preventive measures of that time. When investigated, it was revealed that although the building was carved out of totally fire-proof material, there were some flaws in the construction which led to the outburst of the inferno. Moreover, confusing signs showing fire end emergency exists and incapability of the security to combat stampede and fire were the main reasons for such catastrophic outcomes. This led to some basic modifications in the existing laws of that time, including some obvious things like doors that open outwards and not inwards, compulsory fitting of fire alarm systems and a mandatory fire exit drill which was to be carried out weekly for security employees to make them capable of fighting such situations.

Firefighting, as we know today, is not only limited to fighting and preventing fires, rather, firefighters are looked upon as those heroes who have come to the rescue of many lives caught in dangerous situations, be it a child caught on a high rise building or an old woman stuck in a manhole. The role of firefighters has changed over the years, and one major incident in history, which led to this metamorphosis, was the earthquake in 1906 at San Francisco. This earthquake had lasted for more than 90 minutes and had destroyed more than 500 city blocks, killing over 600 people. Firefighters were responsible for saving lives of people caught in the rubble, under the debris or caught in a fire. Traditional roles changed from here on, and led to the new roles of the firefighters, evolving from firefighters to heroes for many.

Even after so many drills were carried out, preventive measures were taken and so many rules were established, devastating fires kept striking from time to time, reminding us of the importance to involve latest technology and ideas in firefighting. One such incident, which happened in the modern times, was the Boston nightclub fire, which struck the Coconut Grove Nightclub, leaving 500 dead, and registering itself as the worst nightclub fire ever in the history.
Things changed with times, and after the Boston Nightclub incident, the use of technology and the sedate use of modernity in firefighting equipment led to the phasing out of traditional equipments. Gasoline driven firefighting engines were introduced in 1900 and the last steam engine had retired in 1932 at New York. The concept of paid fire fighters was also introduced, and caught up with the department really fast. Wes Barnes, was the first paid firefighting chief for the city of Jefferson, and was paid a salary of $45 a year.

In the series of fresh changes pertaining to firefighting and fire prevention, 'Sparkey', the fire dog was introduced as the mascot of NFPA as the symbol of national safety in 1950. The story behind Sparkey is an interesting one. Sparkey was a shy puppy, who sat outside the fence of a school and wanted to play with the children, but being shy, this Dalmatian kept away. One day, while following these children to their homes, he saw that the children's house was on fire. The dog went barking to the firefighting station to call the fire fighters, and this led Sparkey into being the symbol of national safety.

It has not been a comfortable ride for the firefighters and their respective departments. During the September 11 attack on the WTC twin towers and on the days following it, there have been some tragic days for the firemen. During the incident, many firefighters, most of who were voluntary fire fighters, had either gone missing or had lost their lives. There were skeptical views about the then Mayor of New York - Rudy Giuliani regarding the unprepared-ness of the firefighters he had sent on duty, because of which so many of them had to loose their lives. Whatever the end result, firefighters fought the circumstances with full vigor in that situation also, and were the silent heroes of so many lives they had saved.

History of Fire Fighting (part 1)

The history of fire and fire fighting dates back to thousands of years. Right from the time man gained knowledge of how to start a fire, accidents related to fire have occurred time and again. With time, we have established many agencies, forces and groups to fight fire and to help people recover form the loss of lives and monetary losses that a conflagration brings about. Right through this paper, we would be focusing on those moments in history that have led us to change the way we have perceived fire and firefighting. We will showcase the manner in which we have established different units to combat different inflictions caused due to fires, and how we have improved in our endeavor over these years.

Man had learnt to control fire thousands of years back, and archeological evidences found in Egypt and China are a testimony to this fact. According to sources in the history, the first ever fire fighting crew was formed by Caesar to protect Rome against fires.

Through the history of the United States, there have been massive fires; the first one being at Jamestown in 1608, just one year after it was founded. This was a mass conflagration and led to huge losses of life, property and money. This left the people with only two options, either to move back to England or to face the brunt of the angry Indians and the belligerent winter chill. This was the first major fire in the history of the United States, and many more were to follow.

In 1630, Boston was founded, and this city has probably been a witness to the most conflagrations in the United States. Fires in 1631, 1654 and 1676 hit Boston time and again. These fires accounted for losses unaccounted for even today. The fires were so harsh that it led the administration to give firefighting and fire prevention and serious thought. All this led to the formation of new codes and rules regarding fire fighting, including laws pertaining to the usage of open spaces, fire resistant building material and formation of fire fighting departments. These were the first 'written' rules pertaining to fire fighting and prevention.

Again, it was after the first great conflagration of Boston in 1631, that a law banning smoking at public places was passed at Massachusetts in 1638 in order to curtail the devastation caused due to fire and to ban public display of fire-causing elements. Peter Stuyvesant was the first American Governor to form a fire fighting association in the form of the "Fire Wardens" in 1648, who were supposed to protect the new establishments being set up at New Amsterdam (now New York). The 'Fire Wardens' was the first fire fighting group in America. Some of the responsibilities of the fire wardens include assuring the safe exit of everyone caught in the inferno, to specially escort persons with disabilities to the pre-defined safe exit, to ensure that all the doors, windows and all equipments that may cause fire in the future should be turned off provided there is no danger to the personal safety of the firefighters. Most of the rules and responsibilities laid down for the fire wardens have served as the base for most of the existing rules and guidelines, especially in the US.
Because Boston had been witness to some of the most devastating conflagrations of the 17th century, the first fire department, engine, and paid firefighters were established here in the later part of the same century.

Following in the footsteps of Boston's administration, administration of New York also established the Volunteer Fire Department in 1737. According to America's internal government records, about 73% of all the fire fighters in America have entered via VFDs or Volunteer Fire Departments. The main difference between voluntary fire fighters and regular firefighters lies in the fact that voluntary firefighters do not actually work on fixed shifts and do not reside in firehouses; rather they are called as and when they are needed. Right from the inception of Voluntary Fire Department in New York, firefighters have been coming to the service of the nation time and again through this medium.

From here on, awareness about fire, firefighting and the need to suppress the possible dangers of fire grew, and Benjamin Franklin established an insurance company covering losses due to fire, and was known as the American Fire Insurance Company.

This was the starting point of the long tussle between insurance companies and their customers in America. The first big incident that happened after scores of fire insurance companies- claiming to cover all losses incurred due to fire- came up in abundance, was in December 1835 at New York, when the Great Fire of New York left thousands homeless and jobless and most of the insurance companies who had covered the buildings involved were rendered bankrupt due to the Great Fire.

History of Title Insurance

The need for title insurance arose historically from the fact that traditional methods of conveying real property did not provide adequate safety to the parties involved. Until a century ago, transferring title to real property was handled primarily by conveyancers, who were responsible for all aspects of the transaction. The conveyancer conducted a title search to determine the ownership rights of the seller and any other rights, interests, liens or encumbrances that might exist with respect to the property, and, based on its search, provide a signed abstract (or description) of the status of the title. Although the conveyancer was generally not a lawyer, that individual was recognized as an authority on real estate law. The origin of title insurance is directly traceable to the limited protection that the work of such a conveyancer provided to the purchaser of real property.

In 1868, the celebrated case of Watson v. Muirhead (57 Pa. 161) was filed in Pennsylvania. In that case, Muirhead, a conveyancer, had searched and abstracted a title for Watson, the purchaser of a parcel of real property. In good faith and after consulting an attorney, Muirhead chose to ignore certain recorded judgments and to report the title as good and unencumbered. On the basis of Muirhead's abstract, Watson went ahead with the purchase, but was subsequently presented with, and require to satisfy, the liens that Muirhead had concluded were not impairments to title. Watson sued Muirhead to recover his losses, but the Pennsylvania Supreme Court ruled that there was no negligence on the conveyancer's part and dismissed the case. Watson, an innocent purchaser who had suffered financial damages because of the encumbrances on his title, had no recourse.

The decision of Watson v. Muirhead demonstrated clearly that the existing conveyancing system could not provide total assurance to purchasers of real property that they would be safe and secure in their ownership. As a result of that decision, the Pennsylvania legislature shortly thereafter passed an act "to provide for the incorporation and regulation of title insurance companies." The first title company was founded in Philadelphia in 1876.

This new type of insurance (called "title insurance"), addressed the concerns raised in Watson v. Muirhead by providing:

1. Responsibility without proof of negligence;

2. Financial protection through a reduction of the risk of insolvency; and

3. The assumption of risks beyond those disclosed in the public records (for which the abstractor was not liable).

Since the late 1800s, the title insurance industry has grown to where it now is an essential component in an overwhelming majority of real estate transactions in this country. The services provided by the title insurers may vary somewhat from one area of the country to the other, reflecting the different laws, customs and procedures of the various states and counties throughout the nation. But the essential purpose of these services is the same - to assist all of the parties in real estate transactions by ensuring that the acquisition or transfer of an interest in real estate can be effected with a maximum degree of efficiency, security and safety.

History of Auto Insurance

This new type of insurance was created at the end of the 19th century. As soon as the first car owners started driving their quite mysterious at that time and newly-invented means of transportation a problem arose - it was absolutely necessary to provide peace of mind both to drivers and pedestrians. Thus car insurance was meant to protect them against any harm caused by car accidents which could put people's lives, health or property in danger. However at that time there were many insurance companies and such notions as health, life and property insurances had already been long in existence. So no one had to "reinvent a wheel" - they just had to apply those old principles to the new framework.

That's what TIC (Travelers Insurance Company) did in 1898 when it insured Truman Martin's car providing him with a coverage in the value of $500 and initiating the era of auto insurance.

Even though the first car insurance was actually meant to secure Truman's car from damage caused by horses rather than cars, twenty years later when transport facilities flooded big cities and required the invention of highway regulations, auto insurance was finally supposed to compensate losses caused by collision with other vehicles. That's when car owners were required to buy mandatory insurance coverage for the first time which little by little brought about some considerable changes in legal, economical and political systems in all the states of the U.S.

Auto insurance companies started spreading fast all over the United States and European countries as that new kind of business kept on growing at a blinding performance pace in the first half of the century. However car insurance was developing by fits and starts during all 20th century because in those days, as today, it was quite dependent of the condition and development of the car market itself in each country. Thus, every stationary period in automobile industry was followed by a material setback in auto insurance business. As soon as the car market experienced another sales slump, there were no clients to buy car insurance policies.

In fact that mechanism proved to be true not so long ago when high gas prices affected car industry and auto insurance business at the same time. However the relative stabilization of gas prices which we've witnessed recently is favorable for most auto insurance companies. This makes us believe that the period of decline in auto insurance development should be over by now.

History of Life Insurance

The history of Life Insurance is not a very hard one to understand. Today, Life insurance is simply the contract between a single individual and an insurance company dictating that the company is to pay the policy holder's beneficiary if the insured dies. But where did the idea of being insured at death come from? Who were the first people that implemented this idea? What did they do when the amounts of money were not as high as those of the companies in the life insurance industry today? When did the actual life insurance industry started? All these are pretty interesting questions and the fact of the matter is that some of them cannot be answered to a high extent; however we do know a lot about the history of this wonderful thing that today covers people from all around the globe.

The First Few Signs in Life Insurance History

Historians have been searching for the true start of life insurance as we know it, but they have first deciphered the baby steps that finally ended in the actual death benefit payment. According to the Financial Shopper Network in Ancient China sailors would prevent pirates from stealing all their goods by carrying portions of other ships cargos, this way if a pirate stole the cargo of one ship, the entire load would not be lost. A little bit later in Babylon traders simply gave loans that had to be repaid when the contents of the trade were delivered safely.

So what does this have to do with life insurance? Well both of those civilizations were preventing losing it all. They were doing little baby steps that would help in the long run. Life insurance as we know it however; started in the city of Rome. The people of this highly advanced civilization decided to form what they called "burial clubs". These clubs were designed with one sole purpose, in case of an unexpected death of a club member; everyone else would be willing to pay for their funerary expenses and help the family of the survivor with some money. The concept of life insurance as they knew it ended dramatically in the year 450 A.D. when the Roman Empire fell and its practices were abandoned for a long period of time. It is also important to highlight that many historians agree that about at the same time of Rome, the Indian Empire and its citizens also formed "burial clubs" in order to pay for funerals and help people with expenses. A clue of this according to the Financial Shopper Network is that the "yogakshema, the name of Life Insurance Corporation of Indian's Corporate Headquarters" refers to the Vedas.

Britain and It's Footstep in Life Insurance History

Modern life insurance however did not start until the British decided to try and make it work. The practice of life insurance was banded in the entire continent of Europe except for England and it was exactly the British that started the most prominent life insurance companies known to the European countries today. It was in the middle of the 17th century that in the streets of London, England a group of people met together at Lloyd's Coffee house and decided to come about with life insurance ideas. The coffee house was a famous place for merchants, ship owners and traders and therefore it would be the perfect place to discuss life insurance knowing that most of those people had money.

Life Insurance History in the United States

With the British knowing the basics of life insurance and the things that could help people like the life insurance industry, they decided to give it a try in the United States of America. After talking about how they would decide on coming about with the first life insurance company, they decided to base it on the well known British model at the time. The first life insurance company in American soil was founded in the Southern Colony of Charleston, South Carolina in the year 1735.

About 20 years later the entire colonies saw that this was a good idea, so the Presbyterian Synod of Philadelphia decided to sponsor the first life insurance corporation in the United States, which wrote its first policy in the year 1761. The bad thing about life insurance at that time was that many religious groups opposed it because it would be like anticipating one's own death and with the religious fervor in the North American Colonies at the time; it proved to be quite a challenge to get the whole thing started.

The actual life insurance industry as we know it really took off in the year 1840 because those religious groups calmed down and didn't interfere with governmental affairs anymore. Another big reason that life insurance companies came about proved to be the New York and Chicago Fire's that killed a whole bunch of people in each of the two cities. After this more and more life insurance companies started coming about and in the 1900's business really grew. People wanted to be protected in case of an accidental death.

The 1900's proved to be an era of growth for the life insurance industry. Two wars went on and many people decided to insure themselves to establish a secure monetary future for their families. It is also said that after an attack on the country more people buy life insurance policies. Nobody can contest that simply because after Pearl Harbor a bunch of people panicked and decided to open policies in fear for their lives. The same is true after the turn of this century when the attacks on the World Trade Center took place. People decided that not having protection was not worth it and that a little premium each month was better than leaving their families in economic burden.

Life Insurance Today

As you can see life insurance has moved quite a lot from when it first started in Rome and India. Major corporations with great world interaction and power have surfaced. Companies that have a lot to say in both the economic and political world have come to exist. As you can see the market right now is in a boom and there are many life insurance companies coming to life. Who knows what will happen in the future, but as of now customer should be happy with their options and the thousands of companies that they can choose from!

China's Insurance Industry Before 1949 (part 2)

Although domestic insurers began to develop their market share, they were at a disadvantage in competing with the foreign insurance companies. China's foreign trade was controlled by foreign firms and consequently, it was very difficult for domestic insurers to expand their business. Furthermore, they had to rely on their foreign rivals for reinsurance because of their weak financial strength. As a result, foreign companies continued to dominate China's insurance market and earn substantive profits. For example, the return on equity of the Hong Kong Fire Insurance Company, established in Hong Kong in 1868 by British businessmen, was about fifty percent (Ye, et al. 1998, p. 27).

The Revolution of 1911 not only ended the Qing Dynasty, but also stimulated the development of industry and commerce in China. Consequently, insurers began to expand their business to other trade ports and inland trade cities. Again, foreign insurers maintained their dominant position due to their predominance in capital, technology, experience, and ability to accept ceding business.

It should be noted that American businessmen became heavily involved in China's insurance industry after World War I (WWI). Cornelius Vander Starr, an American entrepreneur, founded an insurance agency called American Asiatic Underwriters in Shanghai in 1919 and then Asia Life Insurance Company in 1921. In the 1930s, American insurers gained an equal position to their British associates and foreign insurance companies thus had about seventy-five percent of China's insurance market (Ye, et al. 1998, p. 120).

Following the War against Japanese Aggression (1937-1945), the Chinese People's Revolutionary War (1945-1949), and the founding of the People's Republic of China in 1949, China's insurance industry was quite volatile as China's economy fluctuated greatly in time of the war. In turn, foreign insurers began to exit the market. Furthermore, people, unable to anticipate the unstable economy and in need of economic security, did not purchase life insurance coverage. Therefore, insurance premiums were mainly collected from trade-related businesses and operations subsequently became concentrated in the trade centers.

To sum up, modem insurance was introduced to China by the West, which controlled China's insurance market profitably for a long period of time. This may have contributed to the concern that China's insurance industry might again be controlled by foreign capital and the prudence in granting foreign insurers licenses to operate in China, which was shared by many people even at the end of the 20 century.

Also read: China's Insurance Industry Before 1949 (part 1)

China's Insurance Industry Before 1949 (part 1)

As a country with a history of more than five thousand years, ancient people of China developed various measures by which people with similar conditions could share risks and help each other. These measures can be considered the most primitive forms of insurance. According to the Book of Yizhou, an ancient Chinese literary history book, Chinese people realized the uncertain nature of natural catastrophes and began to make efforts to store grain in abundant years for famine approximately three thousand years ago. Years later, merchants conducting freight on the Yangtze River invented a clever method to diversify risks. Each merchant would place his goods on several different boats, consequently sharing the losses incurred from the sinking of one boat with other merchants.

The modem insurance industry did not emerge until the end of the Qing Dynasty (1644-1911), China's last feudal dynasty. Initially, the Qing Dynasty saw China as the center of the world and pursued a closed door policy resulting in serious trouble both at home and abroad. The western powers, which had already completed the industrial revolution, later compelled the weak and corrupted Qing government to accept trade, thus introducing modem insurance to China in conjunction with westem commodities to China.

Guangzhou used to be the only trade port in China before the Opium War (1839-1842) between China and England. Usually, foreign insurance companies entmsted their Chinese business to foreign trade firms established in China, the socalled Yang Hang. In 1805, British merchants established the first foreign insurance institution in Guangzhou, China, the Canton Insurance Society. This kind of effort did not gain popularity until the Qing government was defeated in the Opium War and was forced to open more trade ports. Then, the sharp increase of foreign trade resulted in a tremendous demand for insurance. Many foreign firms divested their insurance business and established separate insurance companies in China, which monopolized China's insurance market for a period of time.

In May 1865, the Shanghai Yihe Insurance Society, a freight insurer, was established. It was the first domestic insurer in China and introduced insurance policies written in both English and Chinese for the first time. Previously, policies were written only in English in China. In December 1875, the Insurance Promotion Bureau was founded and it ended the monopoly of foreign insurers for hull insurance. The emergence of domestic insurers was welcomed and supported by the domestic business community. Subsequently, the Renhe Marine Insurance Company, Jihe Fire and Marine Insurance Company, and other domestic insurance companies were set up. Until 1911, there were approximately forty-five domestic insurers operating in China which were highly concentrated in trade ports in Shanghai. Infact, thirty-seven out of forty-five insurers were in Shanghai (Ye, et al. 1998, p. 54).

Also read: China's Insurance Industry Before 1949 (part 2)

History of the US Insurance Market (In the Beginning)

Like many of its first institutions, the early insurance establishments of the United States reflected the influences of 18th century England. In 1720, the English Crown granted monopoly status among the colonies (and in Great Britain itself) to two British stock insurance companies: The Royal Exchange and The London. Perhaps as a consequence of this impervious barrier to entry and the joint lack of expertise and capital necessary for successful stock company operation, the first insurance organizations in North America championed the mutual principle embodied in the friendly societies of Great Britain rather than the profit motive of stock companies." Mutual insurance companies have the distinguishing characteristic that they are
owned and operated by and on behalf of their policyholders, in contrast to stock organizations which operate primarily for the benefit of shareholders.

The first insurance company established in the American colonies was a mutual insurance company called the Friendly Society. Founded in Charleston, South Carolina in 1735 while the country was still under British colonial rule, this organization survived for only five years (Baranoff 2004). Seven years later, Benjamin Franklin and other prominent Philadelphians established a mutual insurance organization called the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire, the oldest continuously operating insurance company in
the country. In 1759, the Presbyterian Ministers Fund, an organization financed initially by donor contributions and later by policy premiums—became the first life insurance company in the colonies by providing a form of life insurance for Presbyterian ministers.

Not until 1792, over a decade after the American Revolution, was a stock insurance company established in the country: the Insurance Company of North America. This first and earliest venture was short-lived and largely unsuccessfiil, selling only six policies in the first five years of operation (Black and Skipper 2000,p. 52). In 1812, a stock company, the Pennsylvania Company for Insurance on Lives and Granting Annuities was chartered, becoming the first company to sell annuities and life insurance policies to the general public in significant amounts. Prior to 1810, the focus in the nascent American insurance industry had been primarily on marine insurance, though many companies were chartered to deal in other lines like fire and life insurance as well (Baranoff 2004). The first known reinsurance arrangement on record occurred in 1813, when the Union Insurance Company ceded some of its fire risk exposure to the Eagle Fire Insurance Company of New York (III 2005b, p. 137).

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)

A History of Insurance (part 1)

Although the insurance policy as we know it is a relatively recent development, the concept is by no means new. The idea of transferring the risk of loss from an individual to his group began thousands of years ago. When a family’s hut burned down, for instance, the entire tribe would rebuild it. Traces of rudimentary insurance practices are still seen among the few primitive tribes that exist today (Raynes 1948: 71).

About 2500 BC, Chinese merchants were using primitive forms of marine insurance (Ibid.: 32). When boat operators reached river rapids they waited for other boats to arrive, before redistributing the cargo so that each boat carried some of the contents of the others. If one boat was lost navigating the rapids, all the operators shared a small loss but nobody had their entire cargo wiped out (Rahman and Gad 1978: 32).

Benevolent societies were developed in Egypt as early as 2500 BC. There is evidence that the ancient Egyptians had writings on the walls of some of the temples in Luxor (Upper Egypt) and that they formed committees for burying the dead. They believed that life after death was inevitable and therefore the body should be preserved for the spirit when they were reunited at the time of reincarnation. That led them to spend prodigiously when death occurred and
even before that to build tombs suitable for the preservation of the body. Therefore the committee spent the money needed to preserve the body after death for as long as that person or his relatives paid an annual fee. This annual fee could either be in the form of agricultural produce or manufactured goods and clothes, sufficient to ensure that the body would be preserved in a wellsealed tomb (organized primarily for religious and social purposes in the
hereafter). However, members contributed to funds that paid burial expenses and gave aid for those seriously ill or injured by accident (ibid.: 32).

the dead. They believed that life after death was inevitable and therefore the body should be preserved for the spirit when they were reunited at the time of reincarnation. That led them to spend prodigiously when death occurred and even before that to build tombs suitable for the preservation of the body. Therefore the committee spent the money needed to preserve the body after death for as long as that person or his relatives paid an annual fee. This annual
fee could either be in the form of agricultural produce or manufactured goods and clothes, sufficient to ensure that the body would be preserved in a wellsealed tomb (organized primarily for religious and social purposes in the hereafter). However, members contributed to funds that paid burial expenses and gave aid for those seriously ill or injured by accident (ibid.: 32).

Also read: A History of Insurance (part 2)