What was the first insurance company? Hamburger Feuerkasses in 1676, followed closely by Nicholas Barbon’s Insurance Office in 1680, was the first insurance company.
Insurance goes back to the point where early humans stopped being hunter-gatherers and settled down. Once people started to farm a barter system arose because it makes more sense for people to grow or make different things and trade than for one person to try to do everything themselves. These were not money-based societies, and the first types of insurance were more publicly minded than insurance is today. Insurance meant that if someone lost their crops, the rest of the group would provide for them. Or, if someone’s dwelling was destroyed, the rest of the group would come together to build a new one.
Once early humans transitioned to a money-based society, probably about 5,000 years ago, trade sprang up and financial insurance became necessary. The first types of insurance were trade-based. In about 3000 BC, Chinese traders insured their goods by spreading them across as many boats as they could. If one boat went down, they would only lose a small part of their goods.
In 1750 BC, a Babylonian insurance text was chiseled into a basalt stele. (A stele is a stone slab.) It has a list of rules on it that explain the liability for the loss of goods or ships. It was very common for a trader to take out a loan to buy goods and ships, which would then be paid back once the trade had been made. This was very common and was the basic idea behind later companies like the Dutch East India Company. The stele explains that if the trader paid an extra sum when they took out the loan, they would have some insurance. For example, if the ship was destroyed by an act of god, the trader would only be liable for the principal of the loan. If the goods were stolen by pirates, the trader would not be responsible, and the loan would be cancelled. These types of trading loans, or maritime loans gradually became common. Insurance stayed this way for thousands of years. In 1343, in Italy, the first insurance contract was drawn up, but it was still to do with trade. However, the idea of insurance slowly began to spread.
In the 16th century, in Europe, different varieties of insurance began to appear, but these were all still between individuals or by “friendly societies”. The friendly societies were groups of like-minded people that pooled money for certain causes. These were often medical expenses or funeral costs. And these are where the first insurance companies came from. These friendly societies would also help each other if their houses burned down. Houses were made entirely of wood and cities were extremely overcrowded. A fire in one house could very easily spread and fire was very common. There were no fire services. Friendly societies would help put out each other’s fires and rebuild each other’s houses. In Germany, these friendly societies were often groups of like-minded businessmen. The brewers in Hamburg had started their own fire contracts. Hamburg experienced many fires and it was impossible for these friendly societies to rebuild. This persuaded the government of Hamburg, in Germany, to act. They combined all of these fire contracts into a company called “Hamburger Feuerkasse”. It was the first company responsible for insurance, albeit only fire insurance. Hamburger Feuerkasse still exists as an insurance company and is the oldest insurance company in the world.
The same thing happened in London. In 1666, the Great Fire of London burned down 13,000 houses over three days. People couldn’t afford to rebuild. A doctor called Nicholas Barbon had the same idea as the government in Hamburg. In 1680, he came together with 11 associates to offer fire insurance for 5,000 houses. His company didn’t last as long as Hamburger Feuerkasse.
People saw the logic of making insurance companies, but they also saw a chance for profit. More companies began to spring up, but they were still marine insurance or property insurance. Lloyds of London is probably the most famous of these companies. It opened in Lloyd’s Coffee House in 1686. Edward Lloyd, the proprietor, ran a coffee shop that was popular with merchants, ship owners, and sailors. In the beginning, he gave them reliable shipping news. As time went by, it became a place where people could go to sell or buy maritime insurance.
In the late 17th century, a German clergyman called Caspar Neumann studied the city of Breslau’s mortality rates. He made a table of all the information, which he sent to the Royal Society in London. Edmond Halley ( he of Halley’s comet fame) used the figures and came up with a life table, which showed the probability of dying at any particular age. This allowed insurance companies to start selling life insurance to people of different ages at different prices. However, it was a very simple system, and it only took age into account. In the 18th century, the Industrial Revolution introduced different industries, more people, and advances in math and science. The mathematics of probability and statistics had evolved to such a point that insurance companies could start to take multiple things into account when pricing insurance. This led to many more different kinds of insurance being introduced and the birth of the modern insurance market. And this is what I learned today.
Sources
https://en.wikipedia.org/wiki/Hamburger_Feuerkasse
https://www.iii.org/publications/insurance-handbook/brief-history
https://en.wikipedia.org/wiki/History_of_insurance
https://en.wikipedia.org/wiki/Life_insurance
https://www.irmi.com/articles/expert-commentary/the-worlds-first-insurance-company
https://en.wikipedia.org/wiki/Lloyd%27s_Coffee_House
https://en.wikipedia.org/wiki/Edmond_Halley