Insurance – An American History

The history of insurance in America. dates to 1735 when Charleston South Carolina residents created the first American mutual insurance company, the” Friendly Society of Mutual Insuring of Homes against Fire.”  The company lasted only until 1741, when a series of major fires put it out of business.  The need for protection against the risk of fire continued and in 1752, Benjamin Franklin and others formed the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire– a mutual company that continues today as The Philadelphia Contributionship.  The Contributionship did more than insure homes against fire.  By establishing criteria for homes it would insure, the company helped contribute to standards that would one day be become both building codes and zoning laws. Before accepting a property for insurance, the company used surveyors to inspect each building. The directors reviewed the surveyor’s reports and set rates.  To assure payment of claims and the continuation of the company, the directors established a capital fund from which losses and office expenses could be paid.

Franklin extended his contributions to the development of insurance by helping to form the Presbyterian Ministers’ Fund in 1759.  Some religious authorities at the time were outraged at the time because insurance was viewed as putting a value on human life.  Criticism abated as critics learned that insurance worked to protect widows and orphans.  Like the Philadelphia Contributionship, The Presbyterian Ministers Fund continued through the year and has now been absorbed by the Nationwide Mutual Insurance Company. 

Ben Franklin’s hand is in both of the earliest insurance companies in America qualifying him to be referred to by some as the “Father of American Insurance.”

Throughout history, the types of insurance offered have been expanded in reaction to new risks   The industrial revolution created a necessity for business insurance and disability insurance.  The advent of motor transportation offered new risks to cover.   The Travelers Insurance Company sold its first accident policy in 1864 and the first auto insurance policy was sold in Ohio in 1897.  As time goes on, new types of insurance are created to match the risks of modern life.

The explosive growth of insurance products and the companies issuing them lead to fraud and scandal in the early years.  Some companies did not set aside the capital to pay claims – as the Philadelphia Contributionship  has done, running instead as Ponzi schemes here the premiums paid by current enrollees bankrolled claims.  Many state laws were passed in an attempt to rein in problems, but insurance was poorly regulated into the early 20th century. 

The Social Security Act in the 1930’s offered old-age benefits that cut into insurance companies’ territory and sent signals to the industry to begin regulating itself or see more government involvement. World War II brought group life and health insurance and consolidation that squeezed out smaller insurers.  The Supreme Court ruled in 1944 that insurance should come under federal regulation, but Congress passed the McCarran-Ferguson Act in 1945 that returned control to the state-level.

Control remains at the state level today, for the most part.   The industry has been called to task over rates based on gender, race and other factors and has responded by becoming more egalitarian and affordable.  The insurance industry has also become more complex as it to responds to the needs of business. Major insurance companies continue to increase in size as they merge with one another and with other companies in the financial industry. Insurance policies can be found today through a host of institutions offering a range of financial services.

So, whatever your Washington home insurance, life insurance or auto insurance needs, there is a huge industry there to help protect you against risk.  We are here to help.

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