Insurance in some form dates back to prehistory. Initially, people sold goods in their own villages or gathering places. However, with the passage of time, they turned to nearby villages to sell.Two types of economies existed in human societies: natural or non-monetary economies (using barter and trade with no centralized nor standardized set of financial instruments) and monetary economies (with markets, currency, financial instruments and so on). Insurance in the former case entails agreements of mutual aid. If one family’s house gets destroyed, the neighbors are committed to helping rebuild it. Public granaries embodied another early form of insurance to indemnify against famines.
The first methods of transferring or distributing risk in a monetary economy were practiced by Chinese and Babylonian traders in the 3rd and 2nd millennia BC, respectively.Chinese merchants traveling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel’s capsizing. The Babylonians developed a system that was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender’s guarantee to cancel the loan should the shipment be stolen or lost at sea. England in the mid 18th century Merchants and shipowners very largely insured their own ventures themselves, but the need for discounting facilities arose after 1750 with the growing volume of bills drawn against West Indian merchants. Thus some of the more important Liverpool merchants began to exercise the functions of banking
Merchants have sought methods to minimize risks since early times. Pictured, Governors of the Wine Merchant’s Guild by Ferdinand Bol, c. 1680.
Achaemenian monarchs in Ancient Persia were presented with annual gifts from the various ethnic groups under their control. This would function as an early form of political insurance, and officially bound the Persian monarch to protect the group from harm.
insurance meaning and types