History of insurance in america


Insurance has effected our lives for many years. We have all at some point used insurance, paid for insurance or have caused others to be benefited by insurance. Isn't it amazing that while we have seen these benefits in the American people's lives, many religious leaders and others though insurance would be a hoax and wouldn't work. Something like a ponzy scheme. It hasn't worked that way. With correct and accurate rating systems and calculations based on years of experience and know how evaluators can plan for claims through loss ratios, prevent claims by denying issues in homes or in vehicles and prepare for these claims to paid while still maintaining an excellent profit and growth for the company to stay in business and flourish. How did it all come about? Did someone just wake up and and say, you give me money and if your house burns to the ground I'll pay for the whole thing. That person would need to be absolutely 100% certain they would actually be able to pay. Well, with enough people paying insurance, 1 claim out of 100 homes, those premiums are able to pay for that one claim and if the claim is just the wall needs to be replaced because a fire actually started but it didn't burn our house down than that's a great profit margin and keeps these people at ease they are still covered if something were to happen.

100 X $20/mo = $2000 in a year for premiums.

However these home policies were 7 year premiums not 1 year or 6 month premiums. For a company starting out they needed all the cash they could in order secure they would be able to play claims in the case of an accident.

History of Insurance

The First insurer in the country was Benjamin Franklin. He would insure properties in the 18th Century. This was back in the days of Lloyd's of London which was born in 1686. However it wasn't until the 1700's that the American colonies to become prosperous and sophisticated to actually develop the concept. At the time that the in the Philadelphia there were 15,000 people. People were terrified of fires. houses at this time were made entirely of wood even the foundation. Also settlements were buildings and homes close together so if there were to occur a fire, the fire would likely jump to the other home causing a mass fire destroying the entire city.

For this cause In 1752, Benjamin Franklin and several other leading citizens of the town founded The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire, modeled after a London firm. This became the first fire insurance company of America. It was structured as a mutual insurance company, Franklin advertised it in a newspaper called the Pennsylvania Gazzette (which he actually owned as well).

Like today, many inspectors went out and inspected homes to evaluate the property and the inspectors would help either reject or accept an application for insurance. The Contributorship issues seven-year term policies and the claims were paid out from a fund that was held in reserve in the event of a claim that was caused on one of these properties.

Many of the inspectors didn't evaluate the homes like we do today with zoning laws and building codes. Some homes are denied insurance because of building codes that without strucutre securities are very dangerous to an individual and therefore an insurance company.

Seven years after the Philadelphia Contributionship was formed in 1759 Benjamin Franklin was instrumental in establishing the first life insurance company called the Presbyterian Ministers fund.

At the time, religious authorities were outrages at placing a dollar amount on the life of a human life but after they saw the benefits of the life of those humans left behind (particularly the orphans and widows) they cooled down.

Then in with the industrial revolution business insurance and disability insurance helped companies and individuals in the work force. Those who could be injured on the job had coverage beyond personal health insurance but their employer actually paid for them while they were sick or injured even while unable to work.

In 1864, the Travelers Insurance Company sells its first accident policy. This began to develop into more and more coverage that became necessary and useful in the lives of the citizens. Individual coverage like renters insurance while your car was in the shop. Coverage when your car is on the side of the road like roadside assistance and others were introduced with time after seeing the usefulness of the policy.

Fraud, Scandal, Ponzi Schemes and Government Laws

Because of some individuals who were trying to force ponzi schemes, some individuals were forced out of companies and laws inacted that protected the rights of the purchaser and allowed for balance and equity in the case of fraud. Things were still bad for insurance companies in the early 1900's for fraudulent reasons. Individuals were still getting taken advantage of which caused the American public to distrust insurance companies. It wasn't until then that insurance companies actually began to benefit and really make a profit from the insureds and really grow as a business.

Close to 1935 something called the Social Security Act came into affect which gave unemployment benefits to retirement. This took away for a lot of the life insurance agents territory and caused friction among life insurance agents steam. With the ability to plan for your retirement, term life insurance policies would be replaced by retirement planning to some individuals so they could actually retire well and still be able to pay for death and funeral costs to individuals if needed.

Now with government regulation on the state level which allows for clear coverage plans, better regulation by area, situations, weather and other ranking factors there are much more clear and stable circumstances that envelope the help and get stablized of insurance companies and individuals. In California with hundreds of homes burning and having claims being made and in Nevada where the government doesn't recognize the payout of certain claims that are made, then insurance companies have to change rates and keep things much more able to regulate and smart. Back in these older years an auto insurance policy was rated on your vehicle at a set in stone price just on the vehicle itself now insurance companies view credit score, prior insurance accidents records, tickets, job, age, marital status and even gender. With these characterizations some would say, the insurer can better determine the risk while still saving the insurance applicant money.

With the change of the internet it's easier than ever to find a quote online. Several years prior you could only get insurance with someone you knew and trusted, a friend or whomever. With online platforms and regulations, algorithims and other platforms your can trust quotes that you are getting online. Whether that be through a local agent or through just a comparative quoting table platform and rating system.