The Growth of Insurance

Modern marine insurance and the practice of underwriting began about 1690 in a London coffee house owned by Edward Lloyd. Lloyd's was a popular meeting place for shipowners and merchants. A statement of a ship's cargo was recorded on a piece of paper and read by the coffee house patrons. Those willing to share the risk of insuring the cargo signed under the statement and indicated the share of the risk they would underwrite (guarantee).

Earlier in the 1600's, two French mathematicians, Blaise Pascal and Pierre de Fermat, developed the theory of probability, which is now widely used in determining insurance rates. The English astronomer Edmond Halley developed the first mortality table in 1693.

The Great Fire of London in 1666 led a doctor named Nicholas Barbon to open England's first fire insurance office. In 1752, Benjamin Franklin helped found the American Colonies' first mutual fire insurance company, the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. The colonies' first life insurance company was the Presbyterian Ministers' Fund, established in 1759. Both companies still exist.

The U.S. life insurance industry grew slowly in the first half of the 1800's. Many religious leaders condemned life insurance. They believed that insurance companies were wrong in placing a monetary value on human life. In 1840, the total value of life insurance policies in force was less than $5 million. By 1865, the total value was about $600 million.

Other types of insurance also grew rapidly beginning in the mid-1800's. A series of disastrous fires during the middle and late 1800's led to a rapid increase in the number of fire insurance policies. In 1864, the Travelers Insurance Company sold the first accident policy. It covered a Hartford, Connecticut, resident named James Bolter during a two-block walk from his home to the post office. The premium was 2 cents for the walk.