Introduction to Insurance

Back to: TelaClaims Adjuster I – Insurance Basics for Adjusting a Claim

Introduction to Insurance The concept of “insurance” is an ancient one. Our earliest ancestors practiced a primitive form of insurance by spreading the risk of death. They accomplished this by hunting in groups as they sought large game in dangerous circumstances. The risk of injury and death was spread across all of the members of the group rather than being focused on a single individual. The key fact here is the idea of spreading risk, one of the biggest concepts of insurance. The concept of insurance continued to change and grow, but each variation focused on spreading the risk of loss among a group of people. This leads to the roots of modern insurance which can be traced to the aftermath of the Great Fire of London. This fire, which in 1666 destroyed thousands of homes, inspired Nicholas Barbon to open an office to insure buildings against fire losses. In 1680, he established England’s first fire insurance company, “The Fire Office,” to insure brick and frame homes. The United States began popularizing insurance in 1732 when Benjamin Franklin initiated having fire insurance as a standard practice and started the first insurance company in Charleston, South Carolina. He then founded the Philadelphia Contribution for the Insurance of Houses from Loss by Fire. What is the Definition of Insurance? Insurance is a financial tool that protects individuals and organizations from unforeseen and extraordinary financial losses by transferring risk to another party or among a group of people. This is essentially defined as The Law of Large Numbers This law basically says that the larger the number of units that are individually exposed to an event, the greater the likelihood that the actual results of that exposure will equal the expected results. Thus spreading RISK which is the key concept you have to understand when dealing with insurance but we will dive deeper into the concept of risk as the lessons and courses progress. How Does it Work? Generally, when insurance coverage is offered, an insurance policy is created. Basically, the policy is a contract whereby one party agrees to indemnify another or to pay a specified amount based on defined contingencies. Usually, the policy is in effect as long as the premiums are paid. The type of insurance that is covered by the policy will be discussed in the lessons and courses to follow.  

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