Buy Now, Save Later: The History of Risk and Insurance

By: Eric Erickson Thursday December 5, 2013 comments

It is likely that you will one day ask yourself: Why do I need insurance? It can certainly seem like insurance premiums eat way at your income without providing anything in return. The reality is that some form or another of “risk sharing” has been around for centuries. We often take for granted that so many aspects of our lives, while primarily safe and trouble-free, are subject to risks that can threaten to destroy our financial wellbeing. Whether it is our home, our automobile, or our small business, few of us can withstand hardships that can range from a minor car accident to the catastrophic loss of a home.

You may be curious to know how insurance has evolved over time to meet both entrepreneurial interests and the realities of risk in an increasingly complex world. Since the beginnings of mutual and stock insurance companies, carriers have had to face to issue of marketing their products to consumers. Thus, the “agent” was spawned. Today, insurance sales pitches have become ingrained in our everyday lives, and the battle over cheapest rates have inundated our televisions, billboards, and computers. Thankfully, independent agent quotes can provide you with real information, affordable rates, and appropriate insurance coverage limits for your home, car, or business regardless of logos and mascots.

How it All Began

Insurance is certainly not a modern concept. Large business enterprises, such as overseas trading or massive building projects, were insured to protect investors. Prior to the 1700’s group insurance policies existed in the form of funds collected through group membership. In colonial times, members of certain organizations would contribute to a pool of money that would be used to help individuals in the event of a home fire or the loss of a boat. Predominance of this type of property coverage led to the creation of the “underwriter” and methods of measuring future risk to determine premiums. 

By the end of the nineteenth century, liability coverage was established. This coincided with the birth of the automobile and a growing density among urban populations. At this point, insurance carriers generally focused their attention at one of two groups: city dwellers with property or farmers. Wealthy urban merchants wanted to protect their businesses and homes, and farmers needed insurance to protect themselves against unpredictable crop production. With such disparate types of coverage, insurance carriers catered to one group or another with little expansion beyond their strict geographical limitations.

Regulations and Options

In the early part of the twentieth century, it became clear that the convenience of automobile travel also brought with it a host of risk. As more and more people began to own a piece of property with so many hazards involved, such as collision, theft, vandalism, not to mention the risks to personal health and safety, the demand for insurance carriers to protect both personal property, and personal liability, became paramount. Car traffic became a very real “shared risk” and auto insurance soon became a requirement in order to limit the potential for devastating financial losses.

By the middle of the twentieth century, most states had developed policies requiring liability auto insurance. This forces anyone who operates a motor vehicle to be purchase insurance with mandatory coverage limits. Auto insurance requirements are meant to create a means for the public to share the financial responsibility of a growing number of accidents. While automobile coverage is among the few required purchases you have to make, the auto insurance industry is heavily regulated to create uniformity and cost controls for basic liability coverage.  

Insurance with a Touch of Independence

As the philosophy of “shared risk” become more and more predominant, and U.S. populations became more mobile, versatile, and complex in their lifestyles and livelihoods, the need for major insurance carriers to capitalize on previously untapped markets became essential. Carriers that had focused mostly on agrarian customers would have to seek out urban customers. Companies headquartered in the East would have to find customers in the West. In order for companies to reach remote customers directly without employing additional agents, they contracted with “third party”, agents that could sell policies without exclusivity. This principle gave birth to the independent agent. 

Today, direct consumer marketing can reach just about everyone, but the independent agent persists, able to develop focused community ties and reach customers with a wide variety of coverage needs. As more and more consumers are researching policies online, there are still a few businesses that can provide you with a human touch. When you call Insurance By Phone, you can be sure that your independent agent quote will reflect the best rates available and the best coverage for you.

Eric Erickson

About the Author: Eric Erickson

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