Benjamin Franklin and American InsuranceNot content with the titles of statesman, scientist, inventor or author, Benjamin Franklin added insurer to his collection. In 1752, the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire became the first mutual fire insurance company in America. Much like London in the 1600s, houses at this time were made almost entirely out of wood. Worse yet, the settlements that grew into the cities were built close together. This was originally done for security reasons but as cities grew, developers built homes very close to each other for the same reasons they do today - to fit as many homes as possible on their development plots.
Scandal, Fraud and RegulationWith the explosion in insurance products and the companies issuing them, the young industry was fraught with fraud and scandal. These ranged from issuing companies that did not actually have the capital to pay claims, running instead like fragile Ponzi schemes, to insurers demanding unfairly high premiums or forcing out competitors in an attempt to create a monopoly. Many state laws were passed to try and curb the problems, but by the early 1900s things were still unsettled. (For related reading,
Investing in Insurance Insurance is always in demand because people and businesses are always looking for ways to minimize risk. Because of the demand and the range of insurance policies available, insurance policies have increasingly become investments in and of themselves. Because the level of insurance concentrated in urban centers could lead to huge losses and chaos in the insurance industry if a mega-disaster - or even a succession of regular disasters - occurred, the insurance industry has begun to repackage its risk in catastrophe-linked securities that trade on the market and mitigate insurers' risk.
Insurance TodayThe internet changed the insurance industry by blowing the field wide open. Now people can go online to find the cheapest rate, even as companies shop internationally for the right coverage. This is one source of motivation for companies to merge with other financial services. The increase in size gives them a global market and the integration of services gives them a domestic advantage with customers who are more concerned with convenience than price.
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