The Industrial Revolution (18th–19th Century)
- Rise of Industrial Risks: With the Industrial Revolution came the rapid growth of factories, mass transportation (especially railroads), and new technologies like steam engines. These developments created new risks that traditional forms of insurance weren’t equipped to handle, particularly the increased likelihood of accidents and property damage. As a result, the insurance industry expanded to cover these new risks, especially fire insurance, transportation insurance (for railroads, shipping, etc.), and liability insurance (to cover accidents caused by machines or workers).
- First Liability Insurance: The need for liability insurance, particularly for injuries caused by industrial accidents, became evident as factories and workplaces grew. The first known commercial workers’ compensation insurance programs began in Germany in the late 19th century, providing compensation to injured workers without needing to prove fault, and these systems spread to other countries.
- The Development of Actuarial Science: The rapid growth of insurance markets led to the need for more sophisticated risk assessment and pricing. Actuarial science developed in the 18th and 19th centuries, using statistical methods to assess risk and set premium levels. The first actuarial tables (which calculate life expectancy and predict the likelihood of death at different ages) were developed during this period, making life insurance more affordable and reliable. James Dodson in 1762 in Britain created the first actuarial tables, which laid the foundation for life insurance calculations.
- The Birth of Modern Life Insurance: Prudential (founded in 1848 in the UK) and MetLife (founded in 1868 in the U.S.) were some of the first companies to offer life insurance on a large scale to the general population. These companies targeted the growing middle class and provided affordable policies that allowed working families to insure themselves against the financial consequences of a breadwinner’s death.
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