The History of Travel Insurance :
Sometimes it seems that insurance cannot be more than a hundred years old… After all, before 1900, there were few people that owned cars, most built their houses by hand and did not take out enormous bank loans for them, and there was almost no overseas travel (after all, many people had to walk for a full day just to get to the nearest town!). In fact, insurance in general (and even travel insurance) has been around for literally thousands of years. We travel from ancient Mesopotamia to the 21st century, exploring how insurance has changed.
What is insurance?
The concept of insurance is that many people pay a relatively small amount to a central institution, for protection from financial loss in the event that an undesired event occurs. With regard to travel insurance, travelers pay a small premium before their trip, and can get protection from the loss that would be incurred if they became sick overseas, were the victim of crime, or inadvertently caused damage to someone else’s property, as well as a range of other circumstances.
The First Insurance Policies
These were inked 3000 years before the common era (BCE), as far as we know, and involved Mesopotamian merchants paying caravan operators a ‘risk surcharge’ to protect their goods in the event of them being damaged or taken. In a way, this was travel insurance for your luggage! In 1750 BCE, the Code of Hammurabi created the first maritime insurance, with the terms “bottomry” and “respondentia” meaning “protection against loss of hull” and “protection against loss of cargo” respectively.
The Industrial Revolution
During the industrial revolution, Benjamin Franklin started the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. This insurance agency refused to insure houses when the risk of being decoyed by fire was too great; all wooden houses were rejected.
Early modern insurance
In 1574, Queen Elizabeth I granted the right to establish an insurance office in the Royal Exchange Building to a man named Richard Candler. A quarter century later, in 1601, the first recognised legislation relating to insurance was formalised, the Assurances Act. The Act stated, “By means of which policies of assurance it comes to pass upon the loss or perishing of any ship, there followeth not the undoing of any man, but the loss lighteth rather easily upon many than heavily upon few, and rather upon those that do adventure than those that do not.”
In 1666, the Great Fire of London occurred, and the idea of fire insurance sprang up not long after. By the 1690s, the British insurance companies had realised it would be smart to protect their investment against another such fire … and formed the first professional fire brigades!
Travel Insurance Origins
James Batterson owned and operated the first travel insurance agency in 1864. At the time, travel insurance was almost exclusively a product of the upper class and upper middle class, as few others could afford to travel. Nevertheless, the risks of travel were still significant for those individuals, as things like theft could potentially cost a traveler hundreds of dollars. Batterson’s travel insurance company covered all of the costs associated from theft and other unexpected circumstances. In the 20th century, health insurance coverage was added as an option under many travel insurance policies and the insurance was adapted to target losses due to missed hotel reservations, canceled flights and other travel-specific costs. This made travel insurance a necessary purchase for many businesses and international vacationers, especially as airplanes became a more popular form of travel.
Modern Insurance Policies-The Effect of the Internet
Today, you can insure just about anything you like. While common insurance policies include your house, car, life, travel, income and possessions, some people have also been known to insure things like their crossed eyes (Ben Turpin) and their sense of humor (Rich Hall).
Insurance nowadays, from home to travel insurance, depends on you telling your insurance company of any individual circumstances relating to your risk of having a certain adverse event happening to you, the company using statistical data to assess the risk, and setting a premium (monthly or yearly payment) for you to pay in order to be insured against certain things happening.
One of the major changes in modern insurance is the advent of the internet. This has not only made risk information more freely available, but has also freed the consumer to find the best travel insurance quote with relatively little effort. This market force means that travel insurance is more affordable than ever, nowadays.