An advertising poster for a Dutch insurance company from c. 1900–1918 depicts an armoured knight.

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.

An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. A person or entity who buys insurance is known as an insured or as a policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and usually involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship.

The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insurer will compensate the insured. The amount of money charged by the insurer from the insured for the coverage set forth in the insurance policy is called the premium. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster. The insurer may hedge its own risk by taking out reinsurance, whereby another insurance company agrees to carry some of the risk, especially if the primary insurer deems the risk too large for it to carry.


Early methods

Merchants have sought methods to minimize risks since early times. Pictured, Governors of the Wine Merchant's Guild by Ferdinand Bol, c. 1680.

Methods for transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively.[1] Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen, or lost at sea.

Circa 800 BC, the inhabitants of Rhodes created the 'general average'. This allowed groups of merchants to pay to insure their goods being shipped together. The collected premiums would be used to reimburse any merchant whose goods were jettisoned during transport, whether due to storm or sinkage.[2]

Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. The first known insurance contract dates from Genoa in 1347, and in the next century maritime insurance developed widely and premiums were intuitively varied with risks.[3] These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance.

Modern insurance

Insurance became far more sophisticated in Enlightenment era Europe, and specialized varieties developed.

Lloyd's Coffee House was the first organized market for marine insurance.

Property insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren's inclusion of a site for 'the Insurance Office' in his new plan for London in 1667."[4] A number of attempted fire insurance schemes came to nothing, but in 1681, economist Nicholas Barbon and eleven associates established the first fire insurance company, the "Insurance Office for Houses," at the back of the Royal Exchange to insure brick and frame homes. Initially, 5,000 homes were insured by his Insurance Office.[5]

At the same time, the first insurance schemes for the underwriting of business ventures became available. By the end of the seventeenth century, London's growing importance as a center for trade was increasing demand for marine insurance. In the late 1680s, Edward Lloyd opened a coffee house, which became the meeting place for parties in the shipping industry wishing to insure cargoes and ships, and those willing to underwrite such ventures. These informal beginnings led to the establishment of the insurance market Lloyd's of London and several related shipping and insurance businesses.[6]

Leaflet promoting the National Insurance Act 1911.

The first life insurance policies were taken out in the early 18th century. The first company to offer life insurance was the Amicable Society for a Perpetual Assurance Office, founded in London in 1706 by William Talbot and Sir Thomas Allen.[7][8] Edward Rowe Mores established the Society for Equitable Assurances on Lives and Survivorship in 1762.

It was the world's first mutual insurer and it pioneered age based premiums based on mortality rate laying "the framework for scientific insurance practice and development" and "the basis of modern life assurance upon which all life assurance schemes were subsequently based."[9]

In the late 19th century "accident insurance" began to become available.[10] The first company to offer accident insurance was the Railway Passengers Assurance Company, formed in 1848 in England to insure against the rising number of fatalities on the nascent railway system.

By the late 19th century governments began to initiate national insurance programs against sickness and old age. Germany built on a tradition of welfare programs in Prussia and Saxony that began as early as in the 1840s. In the 1880s Chancellor Otto von Bismarck introduced old age pensions, accident insurance and medical care that formed the basis for Germany's welfare state.[11][12] In Britain more extensive legislation was introduced by the Liberal government in the 1911 National Insurance Act. This gave the British working classes the first contributory system of insurance against illness and unemployment.[13] This system was greatly expanded after the Second World War under the influence of the Beveridge Report, to form the first modern welfare state.[11][14]

Other Languages
Afrikaans: Versekering
العربية: تأمين
ܐܪܡܝܐ: ܬܫܢܝܬܐ
অসমীয়া: বীমা
asturianu: Seguro
azərbaycanca: Sığorta
تۆرکجه: بیمه
বাংলা: বীমা
Bân-lâm-gú: Pó-hiám
беларуская: Страхаванне
беларуская (тарашкевіца)‎: Страхаваньне
български: Застраховане
буряад: Даадхал
Чӑвашла: Шанăçлани
čeština: Pojištění
chiShona: Tsivatsaona
Cymraeg: Yswiriant
dansk: Forsikring
eesti: Kindlustus
español: Seguro
Esperanto: Asekuro
euskara: Aseguru
فارسی: بیمه
føroyskt: Trygging
français: Assurance
Gaeilge: Árachas
ગુજરાતી: વીમો
한국어: 보험
हिन्दी: बीमा
Ido: Asekuro
Bahasa Indonesia: Asuransi
íslenska: Vátrygging
italiano: Assicurazione
עברית: ביטוח
ಕನ್ನಡ: ವಿಮೆ
ქართული: დაზღვევა
қазақша: Сақтандыру
latviešu: Apdrošināšana
Lëtzebuergesch: Assurance
lietuvių: Draudimas
magyar: Biztosítás
македонски: Осигурување
മലയാളം: ഇൻഷുറൻസ്
मराठी: विमा
Bahasa Melayu: Insurans
монгол: Даатгал
မြန်မာဘာသာ: အာမခံလုပ်ငန်း
Nederlands: Verzekering
नेपाली: बीमा
日本語: 保険
norsk: Forsikring
norsk nynorsk: Forsikring
oʻzbekcha/ўзбекча: Sugʻurta
português: Seguro
română: Asigurare
русский: Страхование
Scots: Insurance
සිංහල: රක්‍ෂණය
Simple English: Insurance
slovenčina: Poistenie
српски / srpski: Осигурање
srpskohrvatski / српскохрватски: Osiguranje
suomi: Vakuutus
svenska: Försäkring
Tagalog: Seguro
தமிழ்: காப்பீடு
తెలుగు: భీమా
Türkçe: Sigorta
українська: Страхування
اردو: بیمہ
Tiếng Việt: Bảo hiểm
吴语: 保险
粵語: 保險
中文: 保險