The Origins and History of Insurance, Part II: The History of Insurance in America

Insurance arrived in America with the first explorers, colonists and settlors; insurance and the insurance industry in America has grown, diversified and developed significantly ever since.
Renaissance concepts of insurance arguably came to North America with Christopher Columbus, renowned son of Genoa, where the first record insurance contract was found. As European traders established themselves in the American colonies and began commerce, the same types of maritime, property and other insurance contracts prominent in Britain and elsewhere followed.[5]

Records indicate that the first insurance company established in the American colonies was the Friendly Society, which was formed in 1735 in Charleston, South Carolina.[9][13][16] The Friendly Society went out of business only three years later after a massive fire destroyed much of Charleston.[15] In 1752, Benjamin Franklin helped form a mutual insurance company called the Philadelphia Contributorship, which is the nation’s oldest insurance carrier still in operation.[13][17]  The first stock insurance company formed in America was the Insurance Company of North America in 1792.[18]

Records suggest that the first insurance company in the United States was a fire insurance company formed in Charleston, South Carolina, in 1732.
Massachusetts enacted the first state law requiring insurance companies to maintain adequate reserves in 1837. Formal regulation of the insurance industry began in earnest when the first state commissioner of insurance was appointed in New Hampshire in 1851. In 1869, the State of New York appointed its own commissioner of insurance and created a state insurance department to move towards more comprehensive regulation of insurance at the state level.[19][20]

The National Association of Insurance Commissioners was formed in 1871 by various state insurance regulators to bulwark their authority, coordinate their activities and pool their resources. Also in 1871, the concept of reinsurance was developed in response to a massive fire that ravaged Chicago.[9][20]

In 1935, the Social Security Act was passed by the United States Congress as part of the New Deal reforms after the Great Depression. Social Security was the first social insurance program mandated by the federal government, and fundamentally changed the way certain types of insurance were viewed in America. Whereas insurance had previously been seen as protection against property loss, liability, health costs or death, after World War II, insurance expanded into a financial tool to help individuals and companies to achieve financial stability and other fiscal objectives.[21]

Insurance and the insurance industry has grown, diversified and developed significantly ever since.  Insurance companies were, in large part, prohibited from writing more than one line of insurance until laws began to permit multi-line charters in the 1950s.  From an industry dominated by small, local, single-line mutual companies and member societies, the business of insurance has grown increasingly towards multi-line, multi-state and even multi-national insurance conglomerates and holding companies.[9] 

1. Risk Management; Emmett J. Vaughan (1992).
2. The Origin and Early History of Insurance Including the Contract of Bottomry; C.F. Trenerry (2009).
3. Insurance and Prevention: How and Why; Donald L. Ungarelli (1984); http://www.ideals.illinois.edu/bitstream/handle/2142/7352/librarytrendsv33i1g_opt.pdf?sequence=1.
4. Dictionary of International Trade; Edward G. Hinkelman; 8th Edition (2008).
5. The Earliest Insurance Contract – A New Discovery; Humbert O. Nelli; the Journal of Risk and Insurance (1972).
6. The History of Insurance, AD Edition; Ryan Looney; esuranceblog,com (2010); http://blog.esurance.com/the-history-of-insurance-ad-edition.
7. An Introduction to the History of Mathematics; Howard Eves (1990).
8. An Estimate of the Degrees of the Mortality of Mankind, Drawn from Curious Tables of the Births and Funerals at the City of Breslaw; With an Attempt to Ascertain the Price of Annuities upon Lives; Edmund Halley (1693).
9. Insurance; The History of Insurance; Columbia Electronic Encyclopedia; 6th Ed; http://www.infoplease.com/ce6/bus/A0858849.html.
10. Nicholas Barbon on a Discourse of Trade; Introduction; Nicholas Barbon; Edited by Jacob H. Hollander (1905).
11. Health Insurance Makes Financial Sense; Dawn Enstruthe (2009).
12. Aviva company history website; http://www.aviva.com/about-us/heritage/events-timeline/non-flash/
13. Insurance Handbook; Insurance Information Institute (2010).
14. The Actuary: The Role and Limitations of the Profession Since the Mid-19th Century; Hans B├╝hlmann (1997).
15. The Friendly Society History; the Friendly Society Restored website; http://www.thefriendlysocietyrestored.com/history.htm.
16. Some sources suggest that either the Friendly Society, or another insurance company, was actually formed in Charleston, South Carolina, in 1732, History of Insurance; Wikipedia; http://en.wikipedia.org/wiki/History_of_insurance.
17. Company History; The Philadelphia Contributorship; http://www.contributionship.com/history/index.html.
18. Stemple on Insurance Contracts; Jeffrey W. Stempel, Vol. 1, §2.07, 3rd Ed., 2007.
19. State Insurance Regulation: History, Purpose and Structure; National Association of Insurance Commissioners; http://www.naic.org/documents/consumer_state_reg_brief.pdf.
20. Insurance Regulation in the United States: Regulatory Federalism and the National Association of Insurance Commissioners; Susan Randall; Florida State University Law Review, Vol. 26:625, 1999; http://www.law.fsu.edu/journals/lawreview/downloads/263/rand.pdf.
21. The Case for Federal Regulation of Insurance; Tom Baker, Tobin Project, 2006, http://www.tobinproject.org/downloads/RP_Federal_Regulation_of_Insurance.pdf.

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