History Of Insurance

Insurance began with "risk". A risk is taking a chance - and in taking that chance the possibility of having a loss. It all began in the Roman Empire, where for a small monthly fee you became part of a "funeral society". If you were to die, the other members would arrange that a sum of money was paid to the deceased family. When there was no money to pay, the society would arrange the burial. Today the insurance company acts as the "society". The money is paid into a common fund and any pay outs or claims are administered by the insurance company.

In essence, the total loss of a group is averaged over all its members. In order to keep a fund going, new members would need to be added as others leave the "group".

Insurance can be seen as an agreement among a group of people that the entire group would make good a loss suffered by an individual member or his / her dependents.