Assurance is such a presence in our everyday lives that it’s hard to imagine a time without it. But throughout much of our colonial spell, that’s just what Americans did. Insurance arrived on the American landscape just about the same time the theory of a single nation—the United States—began to form, and it was ushered in by one of the country’s Founding Fathers. Let’s take a look at the past of insurance in the U.S.
key takeaways
- The first insurance company in the U.S. dates back to colonial days: The Philadelphia Contributionship, co-founded by Ben Franklin in 1752.
- Everywhere U.S. history, the types of insurance offered have expanded in reaction to the new risks of modern life: disability, business, automobiles.
- In the belated 19th century, various scandals and dubious practices rocked the young insurance industry.
- Under the McCarran-Ferguson Act of 1945, protection companies are exempt from most federal regulation and are instead subject to state law.
- Today, the size of insurers continues to lengthen as companies merge with one another and other financial services firms.
Benjamin Franklin: America’s First Insurer
Means insurance was certainly not an unknown concept in the 18th century: England’s famed insurer Lloyd’s of London had been born in 1686. But it memorandum ofed until the mid-1700s for the American colonies to become prosperous and sophisticated enough to develop the concept. It happened in Philadelphia, at the forthwith one of the largest cities in North America, with 15,000 residents.
The city was haunted by the fear of fires. Much approve of London in the 1600s, houses at this time were made almost entirely out of wood. Worse yet, the settlements that produced into cities were built close together. This was originally done for security reasons, but as cities raised, developers built homes very close to each other for the same reasons they do today—to fit as many diggings as possible on their development plots. Although much of Philadephia was built with wide streets and brick or stone shapes, conflagrations were still a concern.
In 1752, Benjamin Franklin and several other leading citizens of the town established The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire, modeled after a London firm. The first holocaust insurance company in America, it was structured as a mutual insurance company, and Franklin advertised it in The Pennsylvania Gazette (which he owned). Groove on modern insurers, the company sent out inspectors to evaluate properties applying for insurance, and rejected those that did not experience its standards; rates were based on a risk assessment of the property. The Contributorship issued seven-year term policies, and puts were paid out of a capital reserve fund.
More Types of Insurance
The Philadelphia Contributionship for the Insurance of Houses from Erosion by Fire set new standards for construction because it refused to insure houses it considered fire hazards. The criteria used to appraise buildings would one day be reworked into both building codes and zoning laws.
Seven years later, Franklin was also important in getting the first life insurance company, the Presbyterian Ministers’ Fund, off the ground.
The various religious authorities at the meanwhile were outraged at the practice of putting a dollar value on human life, but their criticism cooled with the comprehension that the payment of death benefits worked to protect widows and orphans. The Industrial Revolution then brought the exigency of both business insurance and disability insurance home to companies and individuals alike.
Throughout history, the types of guarantee offered have expanded in reaction to new risks. 1864 saw the Travelers Insurance Company sell its first accident protocol. 1889 saw the first auto insurance policy. As modern life grew more complicated, variations in insurance coverage blocked developing.
Scandal, Fraud, and Regulation
With the explosion in insurance products and insurance issuers in the late 19th century, the inexperienced industry was soon wrought with fraud and dubious practices. These scandals ranged from issuing companies without the solid capital to pay claims (operating instead like Ponzi schemes) to insurers demanding unfairly high premiums or cogency out competitors in an attempt to create a monopoly. Many state laws were passed to try and curb the problems, but in the early 1900s opportunities were still unsettled.
In 1935, the Social Security Act went into effect, providing unemployment compensation and retirement forwards. Taking away some of the insurance companies’ territory, it sent a clear signal that encouraged the industry to upon regulating itself for fear of more government involvement. World War II brought a wage freeze, and companies, desperate to entice the workers still in the country, started offering group life and
Investing in Insurance
Insurance is always in demand because people and professions are always looking for ways to minimize risk. The demand for and range of coverage available has caused insurance policies to increasingly transform into investments in and of themselves. Because the concentration of coverage in urban centers could lead to huge losses and industry-wide formlessness if a mega-disaster or succession of regular disasters occurred, the insurance industry has begun to repackage its risk in catastrophe-linked
Insurance Today
The internet modulated the insurance industry radically. Now people can go online to find the cheapest rate, even as companies shop internationally for the put coverage. This is one source of motivation for companies to merge with other financial services firms—the increase in assay gives them a global market, and the integration of services gives them a domestic advantage with customers who are numerous concerned with convenience than price.