The insurance industry dates to the ancient world. New iterations, policies, and offerings have continued to expand. Our societal expectations are to have an insurance plan as a safety net. But, like with most things, this was not always the case and only recently became the expectation.
The first recorded form of insurance was between Babylonian and Chinese traders, around 1750 BC. This first iteration was in the form of a loan, the merchant who received a loan paid extra in exchange for a guarantee that the loan would only have to be paid back if the shipment was not stolen.
This type of insurance was only valid on a per shipment basis, it was not an ongoing policy. Standalone policies did not come until nearly 3,000 years later. The first “modern” insurance policy came in the 14th century. Like the insurance 3,000 years earlier, this was to provide coverage on shipping goods across the world. This was the first time in recorded history the fiscal premium transaction was recorded.
The insurance industry was ever changed when the first insurance book was published in the 16th century. Shortly after publishing, this book was used to help create a massive insurance industry in London when it became a booming city for marine insurance.
The first company to scale marine insurance was Lloyd’s of London. Prior to offering the most innovative insurance policy in history, Lloyd’s was a coffee shop on the coast of London. Lloyd’s is still in business and has offered insurance for the last 332 years.
After this creation, the policy-based insurance industry took off. Insurance was brought to the US in the 1750s by none other than Benjamin Franklin. He started the first US-based insurance company that specialized in fire insurance.
These general insurance policies were the producers of life, medical, health, auto, home, and travel insurance. This was the beginning of the current insurance companies as we know them.
But now we have a totally different beast: a highly competitive, fragmented, low margin, innovative, and necessary industry.
The insurance industry is incredibly specialized, there are separate companies dominating each sub-industry of insurance. The leading insurers in a few markets are United Health with a 31% market share in life insurance, State Farm with an 18% market share in Auto Insurance, and Geico with a 23% market share in Renter’s Insurance.
In 2019, the total US insurance industry collected a total of $1.32 trillion in premiums. It is the second-largest industry in the US, only trailing retirement and pension plans. This is one of the biggest opportunities in the world, and in the digital age, it is primed to be continuing to be broken apart and is subject to innovation as we are seeing.