Considering the fact that with the boom of commercialization and market economy in the last century, the idea of insurance acquired an important and significant status in business as well as for individuals, one may often mistakenly think insurance to be a brainchild of 20th century economics. Though it may come as a major shock to many, the fact remains that the idea of insurance as a financial guarantee to cover for risks involved in daily life or business is nearly 5 millennia old and some social scientists have even gone as far as to comment that insurance surfaced with the appearance of human societies.

 While in non money economies, that is communities which operate without the notion of finance, market, etc the concept of insurance dates back to even more ancient eras, the earliest instance of insurance can be found in the history of Chinese and Babylonian civilizations where the traders had a practice of transfer and distribution of risk in 3rd and 2nd millennium BC respectively. In fact part of the Babylonian way of practicing also becomes evident from the legendary Hammurabi’s Code of Law stating that a merchant would have to pay the lender of money an extra amount in exchange for his assurance to annul the loan to the merchant in the first place in case of the shipment be stolen or lost in any way.

It was in Rhodes, after a period of nearly a thousand years, that a concept called the general average was introduced and developed. According to general average, each and every merchant going on a trade to the sea was required to pay a premium that was divided proportionally which would be in turn utilized in case of any kind of loss or damage to his shipments. But the concept of insurance in the individual fashion as we know of it today is said to have originated around 600 AD in Greece and Rome. Organized guilds known as benevolent societies were set up that took care of families during periods of illness and even provided money for funeral expenses in case of death of an individual member. Most academicians consider this to be the origin of the modern notion of life or health insurances.

The final stage in the development and modernization of the concept of insurance is said to have taken place in and around 17th century London which had become the cradle for post enlightenment knowledge and rational progressive thinking in terms of trade and business affairs. In fact the tragic accident known as the Great Fire of London that took place in 1666 and resulted in the destruction of 13200 houses in and around London plays an extremely significant role in the birth f the modern insurance procedure. Following this large scale tragedy, a sudden drive for insuring buildings was noticed and a person named Nicholas Barbon opened an office to do so. By 1680, this would turn into “The Fire Office”, London’s first insurance company.