Insurance is a business that exists to propel the success of other businesses. It is a device aimed at minimizing the chance of a risk occurring, when it happens, reducing the extent of its damage, and providing the affected persons with compensation in line with the agreement riched before the contract (business).
As a result of man’s incessant exposure to unforeseen contingencies which include loss of valuable property, fire outbreak, accident, death of loved ones, natural disaster, sickness, and many other ones.
Following these challenges faced by man, he sult for his way out of the problem which gives room for insurance which is a method or process which distributes the burden of the loss on a number of persons within the group formed for this particular purpose.
Origin of insurance business
The industrial revolution and development in science and technology have led to people seeking better and more efficient ways of doing things.
Hence some of these early forms of insurance practice; be it bottomry or respondentia bonds, craft guards, sharing of goods among many vessels sailing down Yantex River, Isusu, Akawo, social club, town union, age grade contribution and communal self-help programs have metamorphosed into modern insurance practice.
Bottomary bond was the granting of a loan on the security of a vessel on the understanding that the loan was not repayable if the vessel did not survive the voyage.
Respondentia bond was the same as the bottomy bond except that cargo was pledged to secure the loan. In both cases, interest was added to the loan on repayments.
This interest represented the premium for covering the risk borne by the lender. This provided the trader at that time with a convenient and more secure method of financing voyages.
Insurance has a long history that dates back to the ancient world. Over the years, it has developed into a modern business of protecting people from various risk exposure. The industry has been profitable for many years and has been an important aspect of private and public long-term finance.
In the ancient world, the first forms of insurance can be traced to the Babylonian and Chinese traders. To limit the loss of goods, merchants would divide their items among various ships that had to cross treacherous waters.
One of the first documented loss limitation methods was noted in the Code of Hammurabi, which was written around 1750 BC. Under this method, a merchant receiving a loan would pay the lender an extra amount of money in exchange for a guarantee that the loan would be canceled if the shipment were stolen.
The first to insure their people were the Achaemenian monarchs and insurance records were submitted to notary offices. Insurance was also noted as a gift of substantial value.
These gifts were given to monarchs. By recording their gifts in a register, givers would receive help from a monarch by proving the gift’s existence if they were in trouble.
As the ancient world evolved, maritime loans with rates based on favorable seasons for traveling surfaced. Around 600 BC, the Greeks and Romans formed the first types of life and health insurance with their benevolent societies. These societies provided care for families of deceased citizens.
Such societies continued for centuries in many different areas of the world and included funerary rituals. In the 12th century in Anatolia, a type of state insurance was introduced. If traders were robbed in the area, the state treasury would reimburse them for their losses.
Historical Development of motor insurance
The first motor vehicle was introduced in the United Kingdom in early 1890. The Law Accident and Insurance Society Ltd were introduced in 1898 for providing a limited motor insurance cover. But motor insurance was not compulsory at first and the uncompensated victims of the motor accidents suffered much hardship.
But a whole lot of changes started taking place until the early 1920s when the association of accident office and traffic association which was not compulsory for all insurance companies where formed, and it came to the end in the United Kingdom in 1968.
In 1930 after the world war the road traffic Act introduced compulsory motor insurance covering liabilities to all vehicles used on the road like private cars, commercial vehicles, motorcycles, mobile cranes, and bulldozers. In Nigeria, it was introduced in 1945 and was called the motor insurance compulsory Act of 1945.
History and Development Of Life Insurance Business
The third on the list of development is the life insurance business. The earliest policy of which there is a record dates back to 1583.
During this period only short-term policies were used to be issued meaning that only at the death of the life assured during the term period the money was to be paid. On survival nothing was payable.
More so, there was no fixed sum assured and the amount payable used to vary depending on the fund available. Life insurance virtually did not have any scientific basis at that time.
There was no mortality table through which the risk could be scientifically assessed. The legal backing was also not there for sound and systematic conduct of business.
In 693 Hailey introduced the mortality table giving a definite value to the risk of death. Subsequently, Dodson demonstrated that it was possible to charge a level premium throughout the duration of the policy period.
In 1774, the Life Assurance Act was passed in the British parliament requiring the presence of insurable interest before one could affect a life policy on the life of another.
All these gradually gave life assurance a sound, systematic and scientific basis as we see in the present day.
Insurance as a risk control instrument is therefore central to the economic well-being of man. It is also endemic in any society as ways of averting and reducing the financial consequences of misfortunes have engaged the attention of men at every age.
However, insurance plays a very important role in helping individuals and businesses protect themselves from losses by placing the back in the position they are in before the loss.