📚Insurance 101[ish]

What is Insurance?

Simply put - insurance is about sharing risk. It is about working together to create an efficient system where one person isn’t left carrying all the risk. The easiest illustration of this is where it all started.

A quick bit of Insurance History

Chinese Merchants really understood this concept of sharing risk. Imagine three merchants: A1 Shipping; Acme Transport, and Best Boatloads. Each merchants loads up their boat with their goods only. Storm comes through and wipes out A1 Shipping’s boat. Oops - all their goods are gone too. That’s some risky business. These merchants were clever though. What if, instead of putting all three owned cargo boxes on their owned ships, they SHARED THE RISK? A1 Shipping puts one of their owned cargo boxes on their ship, one on Acme Transport, and one on Best Boatloads? Now, here comes that storm again and there goes that A1 Shipping boat. What did they lose? They lost ONE Cargo box, not all of them. What’s in it for the other merchants? Well - there is risk that one of their boats sinks too, right? So - they are sharing the risk. And sharing is caring.

But we’ve got so very far away from that concept. From Chinese Merchants to the Lloyds Coffeehouse insurance system — to an insurance industry that is just so big and so burdened by regulation that the people buying the insurance are often not the focus of the insurance.