It is said that modern insurance can be traced back to the Great Fire of London. With the city gutted and over 13,000 homes destroyed, many were left without a roof over their head or the financial means to rebuild. As a result, destitution was the inevitable consequence for tens of thousands of Londoners.
With the government unable to foot the bill for all lost or damaged property, the city was in crisis. The solution, as we all now know, was to introduce insurance.
Homeowners could pay a small monthly or annual fee to a bank or private insurance company to protect themselves against critical fire damage. Of course a great deal has changed since 1666, but the need for insurance remains much the same.
Changing with the Times
For one thing, the value of property and the land it is built on has grown exponentially. As a result, the policies that cover damage and theft have had to adapt in parallel. In the 17th century the possessions we now take for granted would be unthinkable, so insurance was relatively cheap. Now the building materials, labour and cost of personal items are so much greater and policies cover many more risks than fire.
With electrical items, carpets, furniture and appliances all under one roof, a single flood, fire or burglary could see thousands of pounds worth of goods written off. This almost certainly would not have been the case for most in the Great Fire.
We have also evolved in terms of the transportation we use on a day-to-day basis. Today most homes have at least one vehicle, and with average the average cost of a new car rising to £28,973 last year http://www.motortrader.com/latest-news/average-car-price-rises-28973/ , they aren’t cheap to purchase or maintain.
Again, this is nothing new. The Road Traffic Act of 1930 dictated that every car required a valid insurance policy. This was as much to protect the owner of the vehicle as it was other road users. Just like building insurance, auto cover remains a legal requirement to this day. While there are still some who deliberately attempt to flout the rules, efforts to combat fraud are always being ramped up.
Tackling Modern Problems
Indeed, there was a recent example in which a family from Durham were found to have deliberately caused crashes in an effort to defraud insurers http://www.telegraph.co.uk/news/uknews/crime/9937896/Police-uncover-countrys-largest-cash-for-crash-insurance-scam.html. Over a number of years and dozens of crashes, it is estimated that they profited to the sum of £3 million, adding over £100 to the policies of all motorists in the local area. While this scheme has a certain Dickensian cheek to it, fraud is one of the many elements that has led some to question the validity of insurance in the modern age.
Unfortunately criminals will always look for easy ways to access cash. So the job of insurers and police is to close the net, cutting off any potential loopholes. But as the previous example shows, the policies of law-abiding citizens can be impacted by the activities of those who play fast and loose with the rulebook. Invariably this creates a certain discord between insurers and customers.
Despite any frustrations that policyholders might have about the cost of insurance, these are often quickly forgotten when it comes to actually making a claim. If your car is stolen or house burns to the ground, insurers are liable for some if not all of the cost. With properties costing hundreds of thousands of pounds, this can amount to a pretty sizable pay out.
Getting Back on Track
Back in 1666, this simply wasn’t available. Consequently most people in the centre of London lost their property, all of their possessions and any hope for the future. Nowadays this simply wouldn’t happen. Sure, there would be a lot of disruption and distress, but the financial implications are nowhere near as severe.
With add-ons such as emergency accommodation and replacement cars now available, picking up the pieces after making a claim is becoming easier all the time. Of course nobody can get back treasured items lost in a house fire or return quality of life following a serious car crash, but insurance can soften the blow. A good policy can cover legal costs, medical bills and a variety of other expenses that might otherwise be incurred.
Even if you’re lucky enough to never find yourself in a position where you need to make a claim, insurance can still provide invaluable peace of mind. Plus, you’ll never need to worry about breaking the law. Ultimately it’s there to protect you and your property. Most people don’t want to use it, but life is nothing if not unpredictable. So when the worst happens, insurance can make it a little more bearable.
So that is why it’s essential and has been for almost three and a half centuries. The prices and possessions may have changed, but the principles have not. Insurance might not be the most exciting subject and some would certainly prefer to never discuss it at all, but the fact that it is there and more flexible than at any other time before is testament to its enduring success.