Insurance Origins

A famous saying goes “In order to comprehend the present, we need to understand the past”. Most times, this saying applies to cultures. For instance, what makes a culture today is derived from its past traditions. The same goes to insurance. In order to understand the concept of insurance and the business, we have to look at its past.

So how did insurance start? Well, most interestingly, it goes way back into the European 17th and 18th century, where Europe was expanding across the continent bringing their trade, exploration, conquests and not forgetting, religion. Christianity was spread across Asia through missionaries, and that’s where insurance originated.

Churches in Europe who sent out missionaries, who were mostly men then, had to leave their families behind. At the same time, in the past, it was quite a risk for missionaries to go into foreign lands, not knowing if they would come back to their land to see their families. Because of this, the church decided to collect a pool of money from its members. The money would be given to the families in the event the missionary, who was the breadwinner, passed away while being in a foreign land.

The community began to realize that the fund should not only be useful for missionaries, but in fact amongst themselves. Hence, more money was pooled in, and it became ‘community insurance’, where people who were not in need, could help those in need.

The fund then became bigger and bigger, that very soon, the community realize that they needed managers to manage the fund and provide accountability – hence came the fund managers. The modern day fund managers include Allianz, Prudential and Great Eastern for instance.

The basic concept of insurance is this: you decide how much you want to pay, which will determine how much you will take when you are in trouble. Hence, the fund is known as a life fund – where it is people helping people.

The life fund in the past only insured a person at death. However, the fund became bigger that it evolved to protecting people when they can’t work due to a major illness, and soon it moved into covering even medical bills, and today, it has moved into investments and savings.

While Allianz are the fund managers, they DO NOT own the fund, because the money are from policy holders. All they earn are the manager’s fee. Hence, although Allianz may have its own corporate fund and assets, they are restricted from taking any money from this life fund in their business expansions.

That is why, in situations where the Fund managers may go into bankruptcy, the life fund, or the money placed in by policyholders will not be affected. The fund simply goes into different fund managers hands (for instance, John Hancock to Manulife, and Universal Life to ING).

That is the difference between insurance and assurance. The term ‘insurance’ would relate better with general insurance –where a situation may or may not happen. The term ‘assurance’ means that the event is sure to happen. That is why in life insurance, the termed used to refer to the policy-owner is ‘LIFE ASSURED’ rather than ‘LIFE INSURED’.

Hence, rather than selling insurance, the job of an agent is to recruit their prospects to JOIN a LIFE FUND.