HISTORY OF INSURANCE

The term Insurance relates with Law and Economics. Insurance is nothing but a risk shifting instrument or mechanism where we shift our risk to Insurance Company to compensate for financial decimation. It is the most efficacious and constructive tool of risk management which supports us to come out of financial crisis. Insurance is a legitimate commitment between two sides, i.e. Insurer and Insured. Insurer assures to compensate or reimburse for financial deprivations due to various reasons. Insurance is a contract or a policy which sets up the legal relationship between the Insurer and Insured.

• A cooperative device 
• A form of risk sharing
• A legal contract
• A guaranteed security

The concept of Insurance is as old as the survival of human being. It has been functioning as the fire extinguisher of human civilization. Insurance emerged with the need of nations and their citizens.

The idea of Insurance dates back to at least the 18^th century B.C., with the code of King Hammurabi. It was considered as the most comprehensive and an ideal contemporary collection of Babylonian laws. It comprised of his legal resolutions, inscribed on a Diorite Stela. It included the provisions of economic and commercial formations. Family laws, criminal laws and civil laws were also systematically incorporated.

The Greek and Romans established first Life and Health insurance with their kind-hearted societies, around 600 BC. Later a type of state insurance was introduced. The state financial department would compensate the losses when the traders were robbed.

A ‘Guild’ is an association of artisans and merchants who oversee the practice of their craft or trade in a particular area. The Medieval period lasted approximately from the 5th to the late 15th centuries. It began with the fall of the Western Roman Empire and transitioned into the Renaissance and the Age of Discovery. In this period most craftsmen were trained and instructed through the special Guild System. After acquiring the skills they had to pay dues to the Guild and trained their own apprentices or probationers. The rich Guilds had large casket that pursued as an insurance fund.

‘Underwriting’ is the procedure through which an individual or institution takes on financial risk for a fee. Underwriters would evaluate the degree of risk of insurers’ business. Colonies were being established in the late 1600s. The practice of Underwriting came out in London coffeehouses. This system was regulated as the unofficial stock exchange for the British Empire. Coffeehouses were the central meeting places for traders, vendors and ship owners.

The first printed book on Insurance was the legal treatise On Insurance and Merchants’ Bets by Pedro de Santarém, published in 1552.