Introduction

What is insurance?

Insurance – protection against possible risk.  It is a service that protects people against financial loss by paying out compensation when a loss occurs.

Basis of Insurance

Insurance is based on the idea of sharing/pooling the risk.  Insurance companies create a pool of money from the premiums they collect from policy holders.  They use some of this money to pay compensation to policy holders who have suffered losses.  They work on the basis that the loss will not happen to everyone. 

History of Insurance Six hundred years ago the insurance business first came into existence.  At that time trade between the European countries and the East was very important.  Europe traded wool and cloth in exchange for silks and spices from the East.  International trade made use of sea transport and therefore it was very important to minimize the dangers inherent in sea travel e.g. storms, piracy, disease etc.   Insurers, also known as underwriters, agreed to compensate sailors and merchants for loss of cargo and indeed ships at sea.  This greatly encouraged trade and also marked the birth of the Insurance industry.

To read more about the history of Insurance please visit Lloyds