The History Behind Insurance

If risk is like a smoldering coal that may spark a fire at any moment, then insurance is our fire extinguisher.

Countries and their citizens need something to spread risk among large numbers of people and to move risk to entities that can handle it. This is how insurance emerged. Discussing insurance has always been my pet subject. Read on to find out about how insurance evolved and how it can work to protect you from being burned by risk.

The main concept of insurance - that of spreading risk - has been around as long as human existence. Whether it was hunting giant elk in a group to spread the risk of being the one gored to death or shipping cargo in several different caravans to avoid losing the whole shipment to a marauding tribe, people have always been wary of risk.The first written insurance policy appeared in ancient times on a Babylonian obelisk monument with the code of King Hammurabi carved into it. The "Hammurabi Code" was one of the first forms of written laws. These ancient laws were extreme in most respects, but it offered basic insurance in that a debtor didn't have to pay back his loans if some personal catastrophe made it impossible (disability, death, flooding, etc.).

In the dark and middle ages, most craftsmen were trained through the guild system. Apprentices spent their childhoods working for masters for little or no pay. Once they became masters themselves, they paid dues to the guild and trained their own apprentices. The wealthier guilds had large coffers that acted as a type of insurance fund. If a master's practice burned down, a common occurrence in the wooden hovels of medieval Europe, the guild would rebuild it using money from its coffers. If a master were robbed, the guild would cover his obligations until money started to flow in again. If a master were suddenly disabled or killed, the guild would support him or his widow and family. This safety net encouraged more and more people to leave farming and take up trades. As a result, the amount of goods available for trade increased, as did the range of goods and services available. The style of insurance used by guilds is still around today in the form of "group coverage".

The practice of underwriting emerged in the same London coffeehouses that operated as the unofficial stock exchange for the British Empire. In the late 1600s, shipping was just beginning between the New World and the old as colonies were being established and exotic goods were ferried back. A coffeehouse owned by Edward Lloyd, later of Lloyd's of London, was the primary meeting place for merchants, ship owners and others seeking insurance during those dangerous waters era.

A basic system for funding voyages to the new world was established. In the first stage, merchants and companies would seek funding from venture capitalists. The venture capitalists would help find people who wanted to be colonists, usually those from the more desperate areas of London, and would purchase provisions for the voyage. In exchange, the venture capitalists would be guaranteed some of the returns from the goods the colonists would produce or find in the Americas. It was widely believed that you couldn't take two left turns in America without finding a deposit of gold or other precious metals. When it turned out that this wasn't exactly true, venture capitalists still funded voyages for a share of the new bumper crop: tobacco.

After the voyage was secured by venture capitalists, the merchants and ship owners would go to Lloyd's and hand over a copy of the ship's cargo to be read to the investors and underwriters who gathered there. The people interested in taking on the risk for a set premium would sign at the bottom of the manifest beneath the figure indicating what share of the cargo they were taking responsibility for (hence, underwriting). In this way, a single voyage would have multiple underwriters, who would try to spread their risk as well by taking shares in several different voyages.

By 1654, Blaise Pascal, the Frenchman who gave us the first calculator, and his countryman Pierre de Fermat discovered a way to express probabilities and, thereby, understand levels of risk. Pascal's triangle led to the first actuary tables that were, and still are, used when calculating insurance rates. These formalized the practice of underwriting and made insurance more affordable.

In 1666, the great fire of London destroyed around 14,000 buildings. London was still recovering from the plague had that ravaged it a year earlier, and many survivors found themselves without homes. As a response to the chaos and outrage that followed the burning of London, groups of underwriters who had dealt exclusively in marine insurance formed insurance companies that offered fire insurance. Armed with Pascal's triangle, these companies quickly expanded their range of business. By 1693, the first mortality table was created using Pascal's triangle and life insurance soon followed.

Insurance companies thrived in Europe, especially after the industrial revolution. In America, the story was very different. Colonists' lives were fraught with dangers that no insurance company would touch. As a result of lack food, wars with indigenous people and disease, almost three out of every four colonists died in the first 40 years of settlement. It took more than 100 years for insurance to establish itself in America. When it finally did, it brought the maturity in both practice and policies that developed during that same period of time in Europe.

Happy New Year 2008!

"tabula rasa" means a blank, clean and new slate (by 16th Century Philosopher John Locke). I learned about this word when I attended my first lecture in NUS back in July 1994!

Today represents a clean slate upon which I can write a new chapter in the story of my life. My wish as I go into 2008 is that I will approach it with a passion to live the life I've dreamed of, to accomplish the goals I'll and have set for myself and that at the end of 2008 I'll be able to look back in satisfaction and look forward in anticipation; not despair and discouragement!

As we enter into this New Year we all tend to have a heightened sense of the opportunities and possibilities that 2008 can bring. The need for goal-setting and goal-reviewing becomes more obvious and clear.

Below are some abbreviated points on goal-setting I have gathered for the New Year. I believe the major reason for setting a goal is for what it makes of you to accomplish it. What it makes of you will always be the far greater value than what you get. That is why goals are so powerful - they are part of the fabric that makes up our lives. And goal-setting is where we create our goals.

Goal-setting is powerful, partly because it provides focus. And focusness is strength; focusness is power. It shapes our dreams. It gives us the ability to hone in on the exact actions we need to perform to achieve everything we desire in life. Goals are great because they cause us to stretch and grow in ways that we never have before. In order to reach our goals we must become better. We must change and grow. The same thing we did last year does not contribute to a better result.

Albert Einstein said that "Insanity is doing the same thing over and over again and expecting different results. We cannot solve our problems with the same thinking we used when we created them."

Also, goals provide long-term vision in our lives. We all need lots of powerful, long-range goals to help us get past short-term obstacles. Life is designed in such a way that we look long-term and live short-term. We dream for the future and live in the present. Unfortunately, the present can produce many difficult obstacles. But fortunately, the more powerful our goals (because they are inspiring and believable) the more we will be able to act on them in the short-term and guarantee that they will actually come to pass!

What are the key aspects to learn when writing our goals?

1. Evaluation and Reflection.
The only way we can reasonably decide what we want in the future and how we will get there is to first know where we are right now and what our level of satisfaction is for where we are in life. Take time, think through and write down your current situation, then ask this question on each key point - Is that okay?

The purpose of evaluation is two-fold. First, it gives an objective way to look at your accomplishments and pursuit of the vision you have for your life. Secondly, it is to show you where you are so you can determine where you need to go. In other words, it gives you a baseline from which to work.

2. What are Your Dreams and Goals?
These are the dreams and goals that are born out of your own heart and mind. These are the goals that are unique to you and come from who you were created to be and gifted to become. So make a list of all the things you desire for the future. One of the amazing things we have been given as humans is the unquenchable desire to have dreams of a better life, and the ability to establish goals to live out those dreams.

Think of it: We can look deep within our hearts and dream of a better situation for ourselves and our families; dream of better financial lives and better emotional or physical lives; certainly dream of better spiritual lives. But what makes this even more powerful is that we have also been given the ability to not only dream but to pursue those dreams and not just pursue them, but the cognitive ability to actually lay out a plan and strategies (setting goals) to achieve those dreams. Powerful isn't it!

What are your dreams and goals? What you want? Have you ever really sat down and thought through your life values and decided what you really want? Have you ever taken the time to truly reflect, to listen quietly to your heart, to see what dreams live within you? Your dreams are there. Everyone has them. They may live right on the surface, or they may be buried deep from years of others telling you they were foolish, but they are there.

So how do we know what our dreams are? This is an interesting process and it relates primarily to the art of listening. This is not listening to others; it is listening to yourself. If we listen to others, we hear their plans and dreams (and many will try to put their plans and dreams on us). If we listen to others, we can never be fulfilled. We will only chase elusive dreams that are not rooted deep within us. No, we must listen to our own hearts.

Here are some practical steps:

Take time to be quiet. This is something that we don't do enough in this busy world of ours. We rush, rush, rush, and we are constantly listening to noise all around us. The human heart was meant for times of quiet, to peer deep within. It is when we do this that our hearts are set free to soar and take flight on the wings of our own dreams!

Schedule it. No other people. No cell phone. No computer. Just you, a pad, a pen, and your thoughts. Think about what really thrills you. When you are quiet, think about those things that really get your blood moving. What would you love to do, either for fun or for a living? What would you love to accomplish? What would you try if you were guaranteed to succeed? What big thoughts move your heart into a state of excitement and joy?

When you answer these questions you will feel great and you will be in the "dream zone." It is only when we get to this point that we experience what dreams are! Write them down. Don't think of any as too outlandish or foolish - remember, you're dreaming! Let the thoughts fly and take careful record.

Now, prioritize those dreams. Which are most important? Which are most feasible? Which would you love to do the most? Put them in the order in which you will actually try to attain them. Remember, we are always moving toward action, not just dreaming.

3. Use S.M.A.R.T. as a guide.
S.M.A.R.T. means Specific, Measurable, Attainable, Realistic, and Time-sensitive. We want to set the goals that our heart conceives, our minds believe and that our bodies will carry out.

Specific: Goals are no place to waffle. They are no place to be vague. Ambiguous goals produce ambiguous results. Incomplete goals produce incomplete futures.

Measurable: Always set goals that are measurable. I would say "specifically measurable" to take into account our principle of being specific as well.

Attainable: One of the detrimental things that many people do - and they do it with good intentions - is to set goals that are so high they are unattainable.

Realistic: The root word of realistic is "real." A goal has to be something that we can reasonably make "real" or a "reality" in our lives.You have to be able to say, even if it is a tremendously stretching goal, that yes, indeed, it is entirely realistic -- that you could make it. You may even have to say that it will take x, y, and z to do it, but if those happen, then it can be done. This is in no way to say it shouldn't be a big goal, but it must be realistic.

Time: Every goal should have a time frame attached to it. I think that life itself is much more productive if there is a time frame connected to it. One of the powerful aspects of a great goal is that it has an end, a time in which you are shooting to accomplish it. You start working on it because you know there is an end. As time goes by you work on it because you don't want to get behind. As it approaches, you work diligently because you want to meet the deadline. You may even have to break down a big goal into different parts of measurement and time frames. That is okay. Set smaller goals and work them out in their own time. A S.M.A.R.T. goal has a timeline.

4. Accountability
It is a contract with yourself or someone else. When someone knows what your goals are, they hold you accountable by asking you to "give an account" of where you are in the process of achieving that goal. Accountability puts some teeth into the process. If a goal is set and only one person knows it, does it really have any power? Many times, no. At the very least, it isn't as powerful as if you have one or more other people who can hold you accountable to your goal.

I want to do something remarkable in 2008!
I want to stop procrastinating and start taking responsibility again.
I want a GREAT AND MARVELOUS 2008!!

Passion;
Accomplishment;
Satisfaction!!!