Earliest Examples of Insurance

It may be hard to comprehend, but when you start checking on insurance throughout history, you will find that the earliest methods of insurance which are very different than the practices used today were founded in 2 B.C. and 3 B.C. with Babylonian and Chinese traders.

The way in which this type of insurance of worked way back then was that the Chinese merchants often had to travel river rapids in order to distribute their products. In order to do this, many merchants would use more than one vessel in order to limit any loss in case the boat capsized, which tended to happen more often than you might imagine.

The Babylonians created a method that can found used by sailing merchants in the Mediterranean and found recorded in the Code of Hammurabi, 1750 B.C. The insurance policy worked in a fashion that a merchant would obtain a loan in order fund the shipment. The merchant paid the lender an extra amount of money for the lender to guarantee to cancel the loan if the shipment was lost at sea or stolen.

During the first millennium B.C, the residents of Rhodes created what they called general average, which was a type of insurance. This allowed merchants to group together in order to pay for their products to be shipped together and ensure the products arrived safely. The money used would be distributed to merchants equally in the case their products were lost at sea or stolen during the voyage.

In the 14th century, a new type of insurance arrived on the scene as the insurance was not coupled with a loan or any other contract in Genoa. The insurance groups were backed by the land that the insurer owned. The very first insurance contract was found in 1347 from Genoa and on into the next century.