With great wealth comes great risk. The more you have of value, the more you have to lose. Humans have long tried to find ways to reduce the risk of losing valuable investments. Going at least as far back as the Code of Hammurabi from 1750 B.C., people have been willing to pay something extra to protect themselves from losing everything. This means Benjamin Franklin certainly didn’t invent the idea of insurance, but he had a very strong influence over how the insurance industry, as we know it today,functions in the United States.
The Philadelphia Contributorship
In 1752, Benjamin Franklin joined forces with Philadelphia’s local firemen to form The Philadelphia Contributorship for the Insurance of Houses from Loss By Fire. As you would expect, the idea came to fruition in response to a large disaster. A huge fire destroyed much of Philadelphia in 1730 and Franklin played a key role in urging people of the city to be prepared in case another one happened.
While putting together fire stations, collecting the proper supplies and recruiting firefighters took precedence, within a few years Franklin and his cohorts came around to the idea of protecting their homes and belongings financially from fire, as well as with teams of men equipped with water. In running the country’s first insurance agency, Franklin and his colleagues learned valuable information along the way that shaped how insurance has worked since.
For instance, the Contributorship learned to develop certain safety standards that determined whether or not a building was worth insuring. Houses that posed a greater risk of catching fire due to something like an unsafe oven or the number of trees in front of the house (which could block the firefighter’s ability to properly squelch the fire) were either denied coverage, or charged a higher rate for insurance than their neighbors.
The Contributorship proved popular, selling 143 policies in its first year and did not have to pay out any monies for damages until the first insured house burned the following year. While the company has evolved considerably since its early years, the fact that it still remains doing business today says plenty about the viability of the way they approached insurance.
The success of the Contributorship earned Franklin an extra paternal title for the founding father to carry through history: “the father of American insurance.”
Growth of the Insurance Field
From insurance to protect homes from fire, the insurance industry in the United States has grown to cover most disasters you can imagine. The two main categories of insurance that people rely on today are the types devoted to covering property damage, like auto and home insurance, and those tied to the well-being of people, health and life insurance.
Both forms of insurance have come with their share of controversy yet those in the latter category, dealing with the sensitive subjects of human health and death, have brought some especially complicated and controversial issues to the history of insurance. While the heated discussions and strong opinions surrounding the United States health care industry are a regular feature in daily news coverage, they’ve got nothing on some of the corruption inherent in the life insurance industry in the 19th century.
To start, life insurance offended many from day one. Many were uncomfortable with the idea of placing a specific monetary value on a human life. To make matters worse, life insurance policies put some people in the dangerous position of being more valuable to family members or spouses dead than alive. There were several known cases of murder in the 19th century inspired by life insurance, and likely more that went under the radar.
From Benjamin Franklin’s desire to help the people of Philadelphia, to an industry that almost all Americans take part in today, insurance has made a clear mark on the American lifestyle. The industry has taken many turns since 1730, and continues to evolve to address the new technologies, issues and complications that arise over time.