Chapter 1: Basics of Insurance

History of Insurance

Origins of Insurance

The insurance industry as we know it today began to emerge at the start of the Industrial Revolution. But, the concept of transferring risk dates back to ancient times. For example, Babylonian traders used a form of insurance to protect caravans in the second millennia BC.

Babylonian traders practiced the first known form of insurance around 1750 BC. The journey of their caravans was fraught with danger, including severe weather, breakdowns, and robbery. So, many traders would take out loans to finance the passage. Once the caravan arrived safely, traders would repay these loans with interest. If the goods were lost along the journey, the loan would be canceled.

This form of insurance appears in the Code of Hammurabi, one of the earliest known collections of laws. The Code is also the origin of the phrase "an eye for an eye." Specifically, "if a man put out the eye of another man, his eye shall be put out." In fact, the Code of Hammurabi had 282 such gems. Another law stated that, "if anyone is committing a robbery and is caught, then he shall be put to death," and, "if a son strike his father, his hands shall be hewn off."