Insurance, that excellent establishment by which losses that would
entirely ruin a merchant, being divided among a company, are rendered
supportable, and almost imperceptible; by which undertakings too great
for one person are easily accomplished, and by which commodities
brought from the most distant regions are made cheaper[684], appears
not to have been known to the Romans, however near they may have come
to the invention of it. If we examine closely the information from
which some endeavour to prove the contrary, it will be found that it is
far from sufficient to support their opinion.
Puffendorf[685], Barbeyrac[686], Loccenius[687], Kulpis[688], and
others, ground their assertions on a passage of Livy[689], who says,
that when the Roman army in Spain was distressed for provisions,
clothing and other necessaries, a company engaged to convey to them
everything they stood in need of, under the stipulation that the
State should make good their loss, in case their vessels should be
shipwrecked by storms, or be taken by the enemy; and we are told
that these terms were agreed to. This was undoubtedly a promise of
indemnification, but by no means an insurance, in which it is always
necessary that a premium should be given. On occasions of this kind,
however, acts of fraud were practised, like those committed at present,
to the prejudice of insurers. Shipwrecks were pretended to have
happened which never took place; and old shattered vessels, freighted
with articles of little value, were purposely sunk, and the crew saved
in boats; and large sums were then demanded as a reimbursement for the
loss[690].
Little more is proved by a passage of Suetonius[691], which Kulpis
and others consider as affording an instance of insurance. That author
tells us, that the emperor Claudius promised to indemnify merchants
for their losses, if their ships should perish by storms at sea. This
passage Anderson must not have read; else he would not have said that
Suetonius ascribed the invention of insurance to Claudius.
In Simon’s edition of Grotius, a passage is quoted from Cicero’s
epistles[692] as an instance of insurance among the Romans, which seems
to be more probable. Cicero says he hopes to find at Laodicea security,
by means of which he can remit the money of the republic, without
being exposed to any danger on its passage. The word _prædes_ may here
signify insurers; but, in my opinion, this quotation ought rather to be
classed among those which have been collected by Ayrer, as the first
traces of bills of exchange[693].
Those remains of the ancient laws which, according to Kulpis and
others, allude to insurance, concern bottomry (_fœnus nauticum_) only;
and that this is much older than insurance has been already fully
proved by Stypman[694].
Malynes[695], Anderson, and others affirm, that insurance is mentioned
in the marine laws of the Isle of Oleron. This island, which lies
opposite to the mouth of the Charente, on the coast of France, was much
celebrated in the eleventh, twelfth, and following centuries on account
of its trade. It belonged then to the duke of Aquitaine, and came to
the crown of England by the marriage of Eleonora, daughter of the last
duke, with Henry II. Under Eleonora were framed in the island those
laws so well-known by the names _Roole d’Oleron_, _Roole des Jugemens
d’Oleron_, that, like the laws of the Rhodians, they were used also
by foreigners. These laws were afterwards enlarged and improved by
Richard I., Eleonora’s son; at least we are assured so by the French
historians: but the English ascribe them to Richard alone. In order to
determine the period when they were framed, I shall only observe that
Eleonora died in the year 1202, and Richard in 1199; and Anderson,
therefore, not without probability, places the origin of them in the
year 1194. A copy of these laws, printed at Rouen, is still preserved,
in which it is said that they were first drawn up in 1266. This,
however, the French and the English declare to be false[696]. They are
written in French, that is, in the old Gascon dialect. I am acquainted
with them from the following scarce book, the author of which, in the
preface, calls himself Cleirac: Us et Coutumes de la Mer[697]; but I
find no traces in them of insurance. Even Cleirac himself, who has
given an excellent explanation of the laws of Oleron, seems not to
have found any; for where he relates everything he knew respecting
the history of it, he ascribes this invention, and also that of bills
of exchange, to the Jews, who made use of it when they were expelled
from France. According to Cleirac, insurance was long detested by the
Christians, who at that time considered it as a sin to take interest;
and the use of it, as well as of bills of exchange, was first made
common by the Guelphs and Ghibelines. Of this pretended service of the
Jews in regard to insurance, I know no proof.
The celebrated maritime laws of the city of Wisby, in the island of
Gothland, whether of later date, as the French assert, or older,
which is more probable, than those of Oleron, are equally silent
with respect to insurance. These laws were not written originally in
Swedish, as l’Estocq[698] says, but in the Low-German. The translation
into High-German by Marquard[699] is incorrect, and the French one
of Cleirac is too free and too much abridged. The Dutch translation
published at Amsterdam is the completest[700].
Insurance was, undoubtedly, not known at the time when the later
Hanseatic maritime laws were framed, else it would have been mentioned
in them. Of these laws there are various editions. One of those most
used is that by Kericke, which is inserted also in Heineccii Scriptorum
de Jure Nautico et Maritimo Fasciculus. Cleirac has given a French
translation of them.
As little respecting insurance is to be found in Il Consolato del Mare.
These maritime laws, highly worthy of notice, were originally written
in the Catalonian dialect; and it seems very probable that they were
drawn up at Barcelona. A part of them appears to have been framed in
the eleventh, but the greater part in the thirteenth century; for the
book itself proves, in more than one place, that they are not all of
the same antiquity. The most correct edition is that published at
Leyden in 1704[701]. Those writers who have pretended that insurance
is mentioned in these Catalonian maritime laws have, perhaps, been
led into this error, because, in an appendix to some of the common
editions, there is a short account of insurance as once practised at
Barcelona. As I have never seen this small treatise, I do not know
whether it contains anything respecting the history of it. The oldest
laws and regulations concerning insurance, with which I am at present
acquainted, are the following.
On the 28th of January 1523, five persons appointed for that purpose
drew up at Florence some articles which are still employed on the
exchange at Leghorn. These important regulations, together with
the prescribed form of policies, which may be considered as the
oldest[702], have been inserted, in Italian and German, by Magens,
in his Treatise on Insurance, Average and Bottomry[703], published
at Hamburgh in 1753. I should have been glad to have found in
Italian authors some information respecting the antiquity of these
regulations[704], a copy of which Magens says he procured from Leghorn;
but I have hitherto sought for it in vain. Straccha however mentions
a Florentine order of June the 15th, 1526, which forbids common
insurance, unless the goods and commodities are specified[705].
There is still preserved a short regulation of the 25th May 1537, by
the emperor Charles V., respecting bills of exchange and insurance,
in which the strictly fulfilling only of an agreement of insurance is
commanded.
In 1549 the same emperor issued an express order, “Op ’t faict van der
zee-vaerdt,” in which occur some articles respecting insurance[706],
and additions were afterwards made to it in 1561.
In the year 1556, Philip II., king of Spain, gave to the Spanish
merchants certain regulations respecting insurance, which are inserted
by Magens, with a German translation, in his work before mentioned.
They contain some forms of policies on ships going to the Indies.
On the last of October 1563, Philip II. published his maritime laws, in
which some forms of policies are given[707]; but on the last of March
1568 that prince forbade the practice of insurance, on account of the
bad use to which it had been often applied. This prohibition I have not
been able to find. I am acquainted with it only by an order of the
20th of January 1570, in which the king expressly recals it, because
the merchants at Antwerp, both subjects and foreigners, had presented
strong remonstrances against it[708].
In the year 1598, the Kamer von Assurantie, Chamber of Insurance, was
established at Amsterdam. An account of the first regulations of this
insurance-office may be seen in Pontanus’s History of the City of
Amsterdam, and in other works[709].
In the year 1600, regulations respecting insurance were formed by the
city of Middelburg in Zealand.
It appears that the first regulations respecting insurances in England,
which may be seen in Anderson’s History of Commerce, were made in
the year 1601. We find by them that insurers had before that period
conducted themselves in such a manner, that the utmost confidence was
reposed in their honesty, and that on this account few or no disputes
had arisen[710].
In the year 1604, regulations were formed respecting insurance at
Rotterdam; and in 1610 were drawn up those of Genoa, which Magens has
inserted in his work, taken from the Latin statutes of the Republic,
together with a German translation.
In 1612 the Insurance Chamber at Amsterdam was established by public
authority, and received several privileges.
Malynes asserts, but without either proofs or probability, that the
people of Antwerp were first taught insurance by the English; and
says that, as the merchants assembled for transacting business in
Lombard-street, so called because certain Italians from Lombardy
had _lombards_ there, or houses for lending money on pledges, long
before the building of the Exchange, it became customary, as it was
in his time (1622), to be guided in policies by what was done in
Lombard-street, in London.
[M‘Culloch states[711] that it is probable insurance was introduced
into England some time about the beginning of the sixteenth century,
for it is mentioned in the statute 43 Eliz. c. 12, in which its
utility is very clearly set forth, that it had been an _immemorial
usage_ among merchants, both English and foreign, when they made any
great adventure, to procure insurance to be made on the ships or goods
adventured. From this it may reasonably be supposed that insurance had
been in use in England for at least a century previous. It appears
from the same statute, that it had originally been usual to refer all
disputes that arose with respect to insurances to the decision of
“grave and discreet” merchants appointed by the lord mayor. But abuses
having grown out of this practice, the statute authorized the lord
chancellor to appoint a commission for the trial of insurance cases;
and in the reign of Charles II. the powers of the commissioners were
enlarged. But this court soon after fell into disuse; and, what is
singular, no trace can now be discovered of any of its proceedings.]
Guicciardini, who wrote his Account of the Netherlands in 1567,
remarks, in describing Antwerp, that the merchants there were
accustomed to insure their ships. Anderson says that this is the first
instance of maritime insurance, which is very astonishing, as he thinks
the invention of insurance is to be found in Suetonius, and in the laws
of the Isle of Oleron.
A most useful imitation of insurance in trade is the institution
of insurance-offices, to indemnify losses sustained by fire. As
far as I have been able to learn, companies for that purpose were
first formed towards the middle of the last century, though houses
were insured by individuals much earlier. The fire-office at Paris
was established in 1745; that of the electorate of Hanover in 1750;
that of Nassau-Weilburg in 1751; those of Brunswick-Wolfenbuttel and
Wirtemberg in 1753; that of Anspach in 1754; that of Baden-Durlach in
1758; that of the county of Mark in 1764; those of Saxe-Weimar and
Eisenach in 1768; and that of the Society of the Clergy in the Mark
of Brandenburg[712], to insure goods and household furniture, was
established in 1769.
It is perhaps known to few, that even in the beginning of the
seventeenth century, a proposal was made by some ingenious person, that
all the proprietors of land should insure the houses of their subjects
against fire, on their paying so much per cent. annually, according
to the value of them. The author of this scheme presented it to count
Anthony Gunther von Oldenburg, in the year 1609, as a means of finance
not to be found in any work printed on that subject. The author in his
plan said[713], that “as many fires happened by which a great number
of people lost their property, the count might lay before his subjects
the danger of such accidents; and propose to them, that if they would,
either singly or united, put a value on their houses, and for every
hundred dollars valuation pay to him yearly one dollar; he, on the
other hand, would engage, that in case by the will of God their houses
should be reduced to ashes, the misfortunes of war excepted, he would
take upon himself the loss, and pay to the sufferers as much money as
might be sufficient to rebuild them; and that all persons, both natives
and foreigners, who might be desirous of sharing in the benefits of
this institution, should not be excluded. The author was confident
that, though the damage might fall heavy at first, a considerable sum
would be gradually raised, from year to year; and that every one might
thus insure his houses against accidents. He had no doubt that it would
be fully proved, if a calculation were made of the number of houses
consumed by fire, within a certain space, in the course of thirty
years, that the loss would not amount, by a good deal, to the sum that
would be collected in that time. He did not however advise that all the
houses in every town should be comprehended, as the money claimed might
amount to too much; but only that some and certain houses should be
admitted into this association.”
I shall here insert, from the same author, the count’s reflections
on this plan, and the conclusion which he formed:--“It is to be
considered,” says he, “what sum every proprietor of land may with
certainty raise and receive; whether the proposed plan can, to the
undoubted benefit of the subjects, and the advantage of their lord, be
honourably, justly, and irreproachfully instituted without tempting
Providence; without incurring the censure of neighbours; and without
disgracing one’s name and dignity; in the next place, that this
institution may not have the appearance of a scheme to bring money
into the country; and still more that it may have no resemblance
to a duty, tax, or impost, but rather to a free contribution, or
unconstrained remuneration for being insured from danger, and by
which losses being made good, houses can be sooner rebuilt, and put
in their former condition.” The count allowed that the object of the
plan was good, considered in every point of view, and that a company
composed of common individuals might be formed to insure each other’s
houses, and pay the losses sustained by fire: but he concluded, that,
if he undertook the plan, Providence might be tempted; that his own
subjects might be displeased; and that, improper ideas being formed of
his conduct, he might be accused unjustly of avarice. “God,” he said,
“had without such means preserved and blessed, for many centuries, the
ancient house of Oldenburg; and he would still be present with him,
through his mercy, and protect his subjects from destructive fires.”
He dismissed, therefore, the ingenious author of this plan, but not
without rewarding him according to his usual liberality.
[Insurance against fire has been known and carried on in England for
nearly a century and a half; at present the number of British Fire
Offices amounts to nearly twenty. The premium demanded for insurance
varies from 1_s._ 6_d._ to 10_s._ 6_d._ per £100 according to the
supposed risk; the duty is enormous, being no less than 3_s._ per
cent. on the amount insured. This tax yields a considerable addition
to the revenue; in 1842 it amounted to £986,420, which corresponds to
£563,668,571 value of property insured, leaving out of consideration
the value of insured farming stock, the duty on which was repealed
in the year 1833. On common risks the duty is no less than 200 per
cent. upon the premium! “Such a duty” observes M‘Culloch, “is in
the last degree oppressive and impolitic. There cannot, in fact, be
the slightest doubt that, were it reduced, as it ought to be, to
one-third its present amount, the business of insurance would be very
much extended; and as it could not be extended without an increase
of security and without lessening the injurious consequences arising
from the casualties to which property is exposed, the reduction of
the duty would be productive of the best results in a public point of
view; while the increase of business would prevent the revenue from
being materially diminished.” Several attempts have of late been made
in Parliament to induce the government to lower the amount of duty,
hitherto without success; it is however to be hoped that some other
mode of raising the revenue may be devised than that of taxing so
enormously the prudence of the industrious classes[714].
In addition to the marine and fire insurance, a somewhat similar
speculation has been applied to human life, in the formation of
life-insurance companies. These receive small annual payments in
consideration of securing to the relations of the assured, or others
to whom his property may be bequeathed, a stipulated sum. This
arrangement we consider of the highest importance in mercantile
countries, particularly to persons engaged in professional or personal
occupations, where on the decease of the principal, the agency or
appointment is not usually susceptible of transfer or bequest. By
means of this species of insurance property is secured to descendants,
who, but for some such precaution, might be left destitute. The oldest
life-assurance office in London is the _Amicable_. This company
was chartered in 1706, in consequence of application made to her
majesty, Queen Anne, by Sir Thomas Allen and others. There are now
in London nearly eighty life-assurance companies, of which about
sixty are exclusively devoted to that object, and the remainder unite
fire-insurance. The terms vary in the different offices, although
not considerably, being founded upon recognised sets of tables. A
comparative table of the annual rates of premium charged by each
British office will be found in Waterston’s Cyclopædia of Commerce.
The premium is of course adapted to the probable duration of life; the
lowest being £1 7_s._ 9_d._ per £100 on a healthy life at the entrance
age of 15, the highest, at the age of 60, being about 7 per cent. A
diseased condition in most incapacitates for insurance, but in some
offices even diseased lives and risks of every kind are insured, of
course at a proportional rate[715].
In the reign of Queen Anne several offices were opened for making
insurances on marriages, births, christenings, service, &c., and
fraudulent practices prevailed to such a degree that by Stat. 9 Ann. c.
6, § 37, a penalty of £500 is imposed on every person setting up such
office, and £100 for any person making such assurance in any office
already established.
The assurance principle has within the last few years likewise been
applied, with the prospect of success, to the guaranteeing of fidelity
in persons holding situations of trust. In this case the calculation
is, that out of a large range of instances where individuals of good
moral character are entrusted with sums belonging to their employers,
a nearly regular amount of defalcation will take place annually, or
within some other larger space of time. This may give an unpleasant
view of human nature, but it is found to be a true one, and the
question which arises with men of business is, by what means may
the defalcation be best guarded against. The choice is between a
guarantee from one or two persons, and from a trading company. By
the former plan, the risk is concentrated upon one or two, who may
be deeply injured in consequence: by the other plan, the risk is not
merely diffused, it is _extinguished_, for the premiums paid by the
insuring parties stand for the losses, besides affording a profit upon
the business. Nor have we only thus a protection for private parties
against the dangers of security; but individuals, who have the offer of
situations on the condition of giving a sufficient guarantee, may now
be able to take, where formerly they would have had to decline them,
seeing that they might have failed to induce any friend to venture so
far in their behalf. Practically, it has also been found that, so far
from parties being more ready to give way to temptation when they know
that the loss will fall upon a company, they are less so, seeing that
the company exercises a more rigid supervision, and presents a sterner
front to delinquents, than is the case with private securities in
general. Guarantee companies are now established in London, Edinburgh,
Glasgow, and other large cities. See Chambers’ Tracts, No. 44.]