Insurance : What for?
Preconceived idea
Insurance these days has a poor reputation: the common conception going around is that contracts have clauses and exclusions in illegible fine print, that Insurers will try to sell you cover you don’t need, and that they will always find a loophole to avoid paying for damage.
Unfortunately, as in any profession, abuses, unscrupulous people or bad advisers may exist… And yet the principle behind insurance, which goes back to Antiquity, comes from the shared desire of a group of tradespeople to protect each of them by protecting the group and its shared interests.
A bit of background…
The premises of the principle of insurance first appeared in Mesopotamia, where tradespeople shared the costs and losses caused by theft and the looting of caravans.
“Modern” insurance for its part goes back to what was called a “bottomry loan”.
This practice which already existed among the Greeks and Romans was established to protect maritime trade as expeditions were often costly and risky affairs. Bankers financed expeditions with a simple principle: if the ship sank, loosing its entire cargo, the bankers would not claim any reimbursement from the merchants. However, if the vessel returned safely, the banker was reimbursed and in addition received a large financial compensation.
But in 1234, certain abuses on interest rates since the 12th century led to Pope Gregory IX issuing a ban on loansharking.
A fair and just system had yet to be found to enable tradespeople to protect their possessions and lenders to get their money back with an acceptable profit.
The idea then arose between bankers and tradespeople to cover the value of the ship and its goods in exchange for a large amount of money provided in advance. Maritime insurance was born and would continue to develop in the harbours of the Mediterranean and later the Atlantic.
The oldest insurance contract that could be traced was taken out in Genoa in 1347, and it was in Genoa too that the first maritime insurance company was founded in 1424.
Modern insurance was born.
Its principles remain till today: an insurer receives a premium beforehand and in return undertakes to indemnify the insured party in the event of loss or damage.
The interesting idea that we can take away today is that everybody’s premiums go into compensating the damages of a few… which may seem unfair… until it’s you who suffered the loss…
Where does the broker come in?
Nowadays, the overwhelming offer of insurance contracts can become a headache for the Insured who sometimes subscribe to cover that they do not need, or find themselves without the cover that is essential for their business, or even subscribe several times to the same cover under a different title. Besides, insurance companies have sprung up in multitude, with or without specialisation, offering every possible insurance one could think of.
How does one make head or tail?
This is where our profession becomes meaningful: The broker is first of all there to define your real needs, then to sort through all the covers and options on offer, and finally to choose only the ones that you need, at the best available rate. The broker can and must discuss it with the insurer in order to adjust certain clauses to your specific case, and will guide you throughout the term of your contract. Finally and most importantly, he or she will be your go-between and ally in the event of loss of damage.
So yes, insurance is useful and even indispensable, and in certain cases mandatory. But above all, it is a profession that demands true professionals.
