The development of the property and casualty insurance industry parallels the history of human economic development. This type of insurance was first established in the maritime field. A single shipwreck could put a ship owner out of business, so it became essential for trade financiers to share this risk. Organized maritime insurance began in the late 17th century at Lloyd's coffeehouse in London, where descriptions of individual ships, their cargoes, and their destinations were posted. Persons willing to share the possible loss, in return for a fee, signed their names below these descriptions indicating what percentage of the financial responsibility they were willing to assume. Those who signed were known as "underwriters," a term still used in the insurance business.
As people became more experienced in this procedure, predictions of loss became more accurate and rates were standardized. To provide protection for larger risks, individuals organized companies. The first marine insurance company in the United States—the Insurance Company of North America—was founded in Philadelphia in 1792 and still does business today; it is now known as CIGNA.
Other types of insurance developed in response to people's need for protection. Insurance against loss by fire became available after the disastrous lesson of the London Fire of 1666. The first accident insurance policy in the United States was sold in 1863. Burglary insurance—protection against property taken by forced entry—was offered soon thereafter. Theft insurance, which covers any form of stealing, was first written in 1899.
Around the turn of the century, the development of the "horseless carriage" led to the automobile insurance industry. The first automobile policy was sold in 1898. This area of the insurance field grew rapidly. In 2012, premiums written for automobile insurance (including liability and collision and comprehensive policies) totaled more than $197.3 billion, according to the National Association of Insurance Commissioners.
Growth of business and industrial organizations required companies to offer protection for employees injured on the job. The first workers' compensation insurance was sold in 1910.
Insurance companies have always been alert to new marketing possibilities. In the past few decades, increasing emphasis has been placed upon "package" policies offering comprehensive coverage. A typical package policy is the homeowner's policy, which, in addition to fire protection for the insured's home and property, also covers losses for liability, medical payments, and additional living expenses. In the mid-1950s, a group of private firms provided the first insurance on the multimillion-dollar reactors used in atomic energy plants.
Over the course of the past decade, costs associated with the property and casualty insurance industry (including underwriting losses) have outstripped the annual rate of inflation. This has generally led to an increase in the premium rates charged to customers. The largest increases have occurred in the automobile insurance sector of the industry. The overall trend reflects some basic changes in American society, including a substantial rise in crime and litigation and the development of expensive new medical technologies. The main challenge of the property and casualty insurance industry in the coming years is to stabilize premium rates to remain competitive with alternative forms of risk financing.
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