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or to secure goods on consignment from producers or suppliers. As security for the loans or for the goods of their trade, the merchants pledged not only their ships or other tangible property but also their lives (as slaves) and those of their families as well. Babylonia, in 2000 B.C., was the center of trade with caravans transporting goods to all parts of the known world. To reduce the risk of robbery and capture for ransom, the Babylonians devised a system of contracts in which the supplier of capital for the trade venture agreed to cancel the loan if the merchant was robbed of his goods. An extra charge was added to the usual rate of interest as a premium for the creditor, to whom the risk of loss by robbery was transferred. The Code of Hammurabi legalized this practice. (This code also provided for the indemnification, by the state or the temple, of a person whose home was destroyed by fire and for murder or robbery.) These arrangements were later known as bottomry contracts (where the ship is security for the loan) and respondent contracts (where the cargo is the security). Knowledge of these arrangements was transmitted through the Phoenicians to the Greeks, Hindus, and Romans. The Rhodians established a comprehensive code of sea laws, including the principle of "jettison" or "general average," which provides that if goods are thrown overboard in order to lighten the ship, what is sacrificed for the common benefit should be made good by a common contribution. The sea laws, including the Greek laws of Solon and the Rhodian sea law, were absorbed in the early Roman civil codes and in the laws of the Byzantine Empire in 533 A.D., and they are a part of today's laws.
insurance organization. The enactment of social insurance laws in England decreased the attractiveness of the friendly societies. Annuities were known to the Romans in the 1st century A.D. Roman law (the Falcidian Law) required that not more than three fourths of a person's estate could go to those not on the prescribed list of legal heirs. This law contained a table of life expectancy to calculate the present value of life rents or bequests (annuities), but it was unsatisfactory. In about 225 A.D., Ulpian compiled a more accurate table of life expectancy, and it was still used in Tuscany in the 18th century. Edmund Halley's table in 1693 was the first improvement in actuarial tables after Ulpian's. Others established the theories of probability and laid the mathematical basis of modern insurance.
insurance policy 1847. The country's first accident insurance is considered to date from the organization of the Travelers Insurance Company in 1863. Steam boiler insurance and plate glass insurance in the United States both date from 1867. The first burglary policy was written in 1885, and Travelers introduced the automobile (bodily injury) policy in 1898. Innovations in the 20th century include the first group life insurance policy in 1910, the first insured pension plan in 1921, and the first group credit plan in 1928. Although the U.S. government had established hospital expense benefits for merchant seamen in 1798, the first hospitalization insurance plan is dated 1921. Group hospitalization and medical insurance received its real start in 1936, when the American Hospital Association appointed a commission that later set up the Blue Cross and Blue Shield plans. Fraternal associations and fraternal insurance were popular among the early colonists and later immigrants, and in the late 19th century they were strong competitors to the corporate life insurers. These fraternals, which furnished life and health insurance protection, had a stronger social and fraternal character than the English friendly societies, but they suffered from the same actuarial and administrative faults and many failed. The Prudential Insurance Company, in 1875, pioneered industrial life insurance in America.
Insurance Regulation
The American colonies and, later, the states chartered and regulated the early U.S. insurers. The early regulations were incorporated into the company charters and, later, in the requirement for annual reports, licensing, and audits. Massachusetts (1855) and New York (1859) led the states in enacting comprehensive state insurance regulations. Modern state regulation is usually associated with the appointment of Elizur Wright, in 1858, as insurance commissioner of Massachusetts. In the Paul v. Virginia decision in 1896, the U.S. Supreme Court declared that insurance was not commerce and therefore not subject to federal law. In 1944 the Supreme Court, in the case of United States v. South-Eastern Underwriters Association and others, reversed itself, declaring that insurance was commerce and, when conducted across state lines, was subject to federal control. In 1945, Congress enacted the McCarran-Ferguson Act, allowing the states to retain control and regulate the business of insurance so long as they did so to the satisfaction of Congress. State regulation is still the primary regulatory force applying to the business. Increasingly, however, federal government agencies such as the Federal Trade Commission and the Securities and
Exchange Commission have an interest in and effect on insurer operations. There is also continuing interest in Congress, in the form of investigation, as to the adequacy of state regulation.