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INSURANCE POLICIES; FROM USUAL TO UNSUAL

“Justice is the insurance that we have in our lives and property. Obedience is
the premium which we pay for it.”

-William Penn

INTRODUCTION

Insurance can be trace in history which dates back to the ancient world.
Over time, it has developed into a modern business of protecting people from
various risks. The industry has been profitable for many years and has been an
important aspect of private and public long-term finance.

FIRST FORMS OF INSURANCE

In the ancient world, the first forms of insurance were recorded by the
Babylonian and Chinese traders. To limit the loss of goods, merchants would
divide their items among various ships that had to cross treacherous waters.
One of the first documented loss limitation methods was noted in the Code of
Hammurabi, which was written around 1750 BC. Under this method, a
merchant receiving a loan would pay the lender an extra amount of money in
exchange for a guarantee that the loan would be cancelled if the shipment were
stolen. The first to insure their people were the Achaemenian monarchs, and
insurance records were submitted to notary offices. Insurance was also noted
for gifts of substantial value1.

The main concept of insurance—that of spreading risk among many—


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
tribe2.

1 http://www.clearyinsurance.com/history-insurance-throughout-world/
2 https://www.investopedia.com/articles/08/history-of-insurance.asp#ixzz5U3sgGvqF

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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 one 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.)3.

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
family4.

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 5.

Development of Insurance in various countries

The first American insurance company was organized by Benjamin


Franklin in 1752 as the Philadelphia Contributionship. The first life
insurance company in the American colonies was the Presbyterian Ministers’
Fund, organized in 1759. By 1820 there were 17 stock life insurance
companies in the state of New York alone. Many of the early property insurance
companies failed from speculative investments, poor management, and
3 https://www.investopedia.com/articles/08/history-of-insurance.
4 Ibid
5 Ibid

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inadequate distribution systems. Others failed after the Great Chicago Fire in
1871 and the San Francisco earthquake and fire of 1906. There was little
effective regulation, and rate making was difficult in the absence of cooperative
development of sound statistics. Many problems also beset the life insurance
business. In the era following the U.S. Civil War, bad practices developed:
dividends were declared that had not been earned, reserves were
inadequate, advertising claims were exaggerated, and office buildings were
erected that sometimes cost more than the total assets of the companies.
Thirty-three life insurance companies failed between 1870 and 1872, and
another 48 between 1873 and 18776.

After 1910 life insurance enjoyed a steady growth in the United States.
The annual growth rate of insurance in force over the period 1910–90 was
approximately 8.4 percent—amounting to a 626-fold increase for the 80-year
period. Property-liability insurance had a somewhat smaller increase. By 1989
some 3,800 property-liability and 2,270 life insurance companies were in
business, employing nearly two million workers. In 1987 U.S. insurers wrote
about 37 percent of all premiums collected worldwide7.

Insurance in Russia was nationalized after the Russian Revolution of


1917. Domestic insurance in the Soviet Union was offered by a single
agency, Gosstrakh, and insurance on foreign risks by a companion company,
Ingosstrakh. Ingosstrakh continues to insure foreign-owned property in Russia
and Russian-owned property abroad. It accepts reinsurance from foreign
insurers. However, following the movement toward a free market
economy (perestroika) after 1985 and the breakup of the Soviet Union in 1991,
some 230 new private insurers were established. Gosstrakh offers both
property and personal insurance. The former coverage is mandatory for

6 https://www.britannica.com/topic/insurance/Historical-development-of-insurance

7 https://www.britannica.com/topic/insurance/Historical-development-of-insurance

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government-owned property and for certain property of collective farms.


Voluntary property insurance is available for privately owned property.
Personal coverage such as life and accident insurance and annuities also are
sold8.

Before 1991, insurance against tort liability was not permitted, on the
ground that such coverage would allow negligent persons to escape from the
financial consequences of their behaviour. However, with the advent of a free
market system, it seems likely that liability insurance will become available in
Russia9.

After the breakup of the Soviet Union, countries in eastern Europe


developed insurance systems of considerable variety, ranging from highly
centralized and state-controlled systems to Western-style ones. Because of
recent political and economic upheavals in these countries, it seems likely that
the trend will be toward decentralized, Western-style systems.

A few generalizations about insurance in eastern European countries


may be made. Although state insurance monopolies are common, they are
losing some business to private insurers. Insurance of state-owned property,
which was considered unnecessary in socialist states, has been established in
several countries10.

Insurance in Japan is mainly in the hands of private enterprise, although


government insurance agencies write crop, livestock, forest fire, fishery, export
credit, accident and health, and installment sales credit insurance as well
as social security. Private insurance companies are regulated under various
statutes. Major classes of property insurance written include automobile
and workers’ compensation (which are compulsory), fire, and marine. Rates are

8 https://www.britannica.com/topic/insurance/Historical-development-of-insurance
9 https://www.britannica.com/topic/insurance/Historical-development-of-insurance
10 https://www.britannica.com/topic/insurance/Historical-development-of-insurance

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controlled by voluntary rating bureaus under government supervision,


and Japanese law requires rates to be “reasonable and nondiscriminatory.”
Policy forms generally resemble those of Western nations. Personal insurance
lines are also well developed in Japan and include ordinary life, group life, and
group pensions. Health insurance, however, is incorporated into Japanese
social security.
Japan’s rapid industrialization after World War II was accompanied by
an impressive growth in the insurance business. Toward the end of the 20th
century, Japan ranked number one in the world in life insurance in force. 11.

Worldwide operations

Due to the great expansion in world trade and the extent to which
business firms make investments outside their home countries, the market for
insurance on a worldwide scale expanded rapidly in the 20th century. The
majority of the world’s insurance businesses are concentrated in Europe
and North America. These companies must service a large part of the
insurance needs of the rest of the world. The legal and regulatory hurdles that
must be overcome in order to do so are formidable12.
In 1990 the 10 leading insurance markets in the world in terms of the
percentage of total premiums collected were the United States (35.6 percent);
Japan (20.5 percent); the United Kingdom (7.5 percent); Germany (6.8 percent);
France (5.5 percent); the Soviet Union (2.6 percent); Canada (2.3 percent); Italy
(2.2 percent); South Korea (2.0 percent); and Oceania (1.8 percent)13.
Major world trends in insurance include a gradual movement away
from nationalism of insurance, the development of worldwide insurance
programs to cover the operations of multinational corporations, increasing use
of reinsurance, increasing use by corporations of self-insurance programs

11 https://www.britannica.com/topic/insurance/Historical-development-of-insurance
12 Ibid
13 Ibid

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administered by wholly owned insurance subsidiaries (captive companies), and


increasing use of mergers among both insurers and brokerage firms14.

General Types of Insurance

The 1s t known life insurance policy was written in England


in the late 1500s. Later, groups in England started to form friendly
societies that provided some insurance to its members. Workers
made contributions to funds held by the society, to pay
subsequent claims by its members or their families, but many of
these societies went bankrupt because of poor management.
Consequently, the Friendly Society Act of 1793 was passed to
curtail their mismanagement15.

Fire insurance began soon after 1666, when the Great Fire of
London burned for 5 days, destroying 85% of the city. In 1667, a
mutual society was formed by Nicholas Barbon, originally called
the Fire Office, then later renamed the Phoenix Fire Office, after
the mythical bird that burned, but then reemerged from its own
ashes. One policy that was recorded in 1682 costing 30 shillings to
insure property worth 100 British pounds for 7 years. Other fire
insurance companies were formed soon afterwards, 1 s t in Great
Britain, then later in the United States16.

Fires were common during this era and for several centuries
afterwards, because many buildings and their contents were made
of wood, and candles and lanterns used fire for lighting, causing
many fires. Additionally, major fires occurred in a number of
growing cities that caused extensive damage, making fire
insurance the most common form of insurance at this time 17.
14 https://www.britannica.com/topic/insurance/Historical-development-of-insurance
15 https://thismatter.com/money/insurance/insurance-history.htm
16 https://thismatter.com/money/insurance/insurance-history.htm
17 https://thismatter.com/money/insurance/insurance-history.htm

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In 1752, Benjamin Franklin helped create the 1s t fire insurance in


the United States, aptly named the Philadelphia
Contributionship for the Insurance of Houses from Loss by
Fire. At this time, Philadelphia had about 15,000 people and 8
volunteer fire companies. Fire insurance needs subscribers, so a
notice was placed in the Pennsylvania Gazette in February 1752 to
advertise the venture, and enough people responded by April that a
meeting was held and a board of directors chosen to begin the
insurance fund. Policies covered only the buildings and were
issued for a term of 7 years after policyholders paid a deposit. A
portion of the deposit, after subtracting a fee for the survey, policy,
and fire mark, was returned to the policyholder after the 7-year
period. The insurance rate was set by the board of directors, based
on reports filed by surveyors who inspected the insured property18.

Health insurance also largely began in the 1900s, especially


as healthcare became more specialized and expensive. As factories
and other industries started to use more machinery, many people
were injured on the job, giving rise to workers compensation in
1910. Also in the 1900s, many social insurance programs were
enacted, including the Social Security Act in 1935 and Medicare in
196519.

Before 1950, many state laws required insurance companies


to specialize in particular kinds of coverage, but later, insurers
were permitted to offer package policies that combined the various
forms of coverage, such as homeowners insurance and liability.
Later, to increase competition, other types of companies besides

18 https://thismatter.com/money/insurance/insurance-history.htm
19 Ibid

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insurance companies, such as banks, were permitted to sell


insurance20.

TOP 10 STRANGEST TYPES OF INSURANCE POLICIES

(1) Multiple birth insurance


Soon-to-be-parents can’t really be surprised with quadruplets anymore,
since ultrasounds and advanced medical technologies can prepare you well in
advance. That doesn’t make mothers and fathers any more prepared financially
for a (literal) bundle of joy. A multiple – or twin – birth insurance policy, which
requires one to buy a premium at the time of pregnancy; if twins or more are
the result, the policy pays out in cash accordingly to compensate for the extra
costs that extra babies bring. (There’s also an infertility insurance to
compensate for out-of-pocket expenses associated with in-vitro fertilization and
other medical procedures.)21

(2) Insured asset: Entire body

David Beckham is probably one of the most popular football players in the
world. He insured himself of an amount: US$195 million (RM719.9 million) To
cover himself from any accidents that may hurt this position, Beckham took
out the biggest personal insurance policy in sporting history. The policy covers
him against injury, illness, and disfigurement, since many of Beckham’s
endorsement deals rely on his looks22.

(3) Insured asset: Sense of humour

Well-known comedians, had possibly one of the hardest to prove insurance


policies of all – he insured himself against a permanent loss of humour.

(4) Insured asset: Crossed eyes

20 Ibid
21 https://www.policygenius.com/blog/9-weird-types-of-insurance-you-never-knew-existed/
22 https://www.imoney.my/articles/12-weirdest-things-people-insure

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Back during the silent film era, actors had to go the extra mile to make
people laugh. The sight of silent film star Ben Turpin with crossed eyes was all
it took to send moviegoers into fits of laughter. Convinced that his crossed eyes
were the key to his silent comedic success, Turpin took out an insurance policy
that would pay him if his eyes ever uncrossed. He was the first celebrity to
insure a body part23.

(5) Insured asset: Sperm

Legendary Van Halen’s vocalist, David Lee Roth insured his own sperm
during the height of his glory in the 80′s. Roth’s insurance policy was designed
to protect him from any unwanted pregnancies. This way, if he impregnates
someone by accident, he has this policy to rely on to cover child support and
protect against potential24.

(6) Insurance for a "Change of Heart"

It's a real bummer if your family spends thousands on a wedding, only to


have you break off the engagement. To protect against this possibility of cold
feet. In other words, you get your money back if the bride and groom decide to
go their separate ways. There are a few catches, though. The coverage only
applies to "innocent financiers," such as the bride or groom's parents, not the
bride and groom themselves. And the wedding must be cancelled at least 365
days in advance of the scheduled date25.

(7) Insurance against Death by Laughter

Lloyd's of London is known for covering a wide range of things, but the
funniest might be the effort to insure a comedy troupe in the event that an
audience member died from laughter26.

23 Ibid
24 https://www.imoney.my/articles/12-weirdest-things-people-insure
25 https://www.wisebread.com/10-weird-types-of-insurance-you-didnt-even-know-about
26 https://www.wisebread.com/10-weird-types-of-insurance-you-didnt-even-know-about

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(8) Kidnapping and Ransom Insurance

One can protect oneself if you've been kidnapped, and get reimbursed for
any ransom money and expenses once you're freed. Truthfully, these policies
are geared more toward businesses with high-profile employees. But
individuals can get policies as well. Traveler's Insurance calls this policy a
"must-have," and even produced a two-minute video about it27.

(9) Immaculate Conception Insurance

The Catholic Church insured three of their most valuable nuns against
the risk of Immaculate Conception in 2006 through British
Insurance28. There are some sisters of Roman Catholic Church who are
willing to pay premiums on a policy that will cover the cost of an
immaculate conception, just in case the second coming of Jesus Christ
actually happens. If one can prove that she has been impregnated by god
and the insured is carrying his son29.

(10) Valentine Insurance

This insurance ensures that you are not left out on a Valentine’s Day. The
Valentine Insurance concept is the brainchild of insurers of Japan, where only
women give presents to men usually in the form of chocolates. Get enrolled for
the service and you will receive a packet on Feb 14 containing chocolates and a
personal message from a self-proclaimed vivacious lady30.

DISCUSSION AND CONCLUSION WHY PEOPLE ENTER INTO INSURANCE


POLICIES

27 https://www.wisebread.com/10-weird-types-of-insurance-you-didnt-even-know-about
28 http://www.tfwinsurance.com/strange-insurance-policies-youve-probably-never-heard/
29 https://www.lolwot.com/10-strange-and-unusual-insurance-policies-you-can-actually-get/

30 http://usattorneynews.com/2017/02/01/check-6-strange-insurance-policies/

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 Security & Assurance

It serves as security for your family and loved ones. This is certainly the
most important aspect that will concern you. It serves as an assurance that
there is enough security for your family in uncertain situations.

 The Debt Issue

If you have debt that you still need to pay, insurance guarantees that your
debts will be paid. Nobody wishes to hold their families in the position where
they have to deal with the financial liabilities you left behind. Insurance will
ensure such a day never comes.

Be it a property loan, a personal loan, a credit loan or any auto loan, the
insurance policies that you buy will help repay these debts.

 Retirement plans

As you retire, your monthly source of income comes to an end too. This may
be a source of your worries and tension. But insurance will ensure that you
have no worries as such. As you put your money into the pension plan, at the
end of your retirement you get to enjoy the fruits of those labors.

 Long Term Plans & Dreams

Using the money from your insurance you can always fulfill those lifelong
hopes, dreams, and plan. You can open up a small business after retirement or
maybe buy yourself a house using this.

You also get the benefits of different investment options by the variety of
policies, which help you achieve those long-term goals

 No Business Worries

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Insurance apart from benefitting your family and your personal plans is a
great way for your business too. There are various kinds of insurance policies
like the term insurance, which lets you have protection for a fixed term and the
benefits are paid during the event of your death.

 For Tax Saving

One of the many reasons why people prefer to invest in an insurance is


because of its tax saving aspect. Irrespective of the plan that you have taken,
you can save tax with the different insurance policies.

 Helps to Buy various Options

Insurance helps you get great deals and profits through a vast number of
policies. As you invest in those policies and finish the term, you get the benefits
of it. Therefore, it is an instrument, which helps you invest for a long time and
achieve your goals later on.

 A Savings Tool

There is no doubt, insurance acts as a tool and source for saving money. It
is your real life piggy bank where you can add and invest in it, take up a
variety of policies to secure your future and save the money lifelong. There are
various policies, which will benefit you when you invest in them as early as
possible. Hence, it is imperative that you buy such policies early in life. As you
pay the premium, the extra money is accrued in the form of a cash value.

 Mental Peace

You cannot avoid the unexpected tragedies of life and death is the most
unexpected of all. But if you have a insurance you will have the peace of mind.
You will know there are enough financial security and stability options for your

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loved ones when you are gone. Even the smallest policies will be of immense
help during the difficult times.

As you grow older, you will have the satisfaction. The need of an insurance
policy changes with the changing phases of life, and in the event of your
demise, it will prove to be a great source of financial security for your family.

If you die today? Will your family live at a better, same, or worse lifestyle than
they have now? (CLOSING STATEMENT)

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