If we look at what insurance really is, then we can see that it has played a major part in history from the beginning. So what is it? Insurance is a way of managing risk, whether it is hedging crops in farming, providing security for a merchant ship, or even just offering compensation for those just-in-case moments.
Cave Men Unity
There is no way our hairy ancestors would have gone out traipsing after a wooly mammoth on their own. They were going to insure their efforts and limit their risks by using more of their cave friends to get the job done. In return, they were more than ready to share the meat. But if they didn’t, I’m sure they would get a good club to the head.
Insurance on the Seven Seas
How do you think explorers and merchants made it around the world with all of that risk? One thing is for sure, they were using their own form of insurance. Merchants and companies would look for money from venture capitalists. In this way they were spreading the risk if their voyage fell through.
Back to land
While there was a form of marine insurance, there still needed to be some insurance for people living their lives on land. Farmers were always at risk of losing their crops to a bad storm or an early frost. Sharecropping enabled tenant farmers to share some of the risk by only paying land owners according to the amount they harvested.
Overall, insurance isn’t a new idea. We all have risks and need to find ways to share them. And as long as there are other people out there willing to take on some of your risks for a fair price, it will continue to be a successful way of protecting you and your investments.