The History of Insurance in America

Insurance is such a presence in our everyday lives that it is hard to imagine living without it. But for much of the colonial era, that’s just what Americans did. Insurance reached the American landscape around the same time as the idea of ​​a single nation – the United States – began to take shape, and it was ushered in by one of the country’s founders. Let’s look at the history of insurance in the US.

Important takeaways

  • The first insurance company in the USA dates from the colonial days: The Philadelphia Contributionhip, founded with Ben Franklin in 1752.
  • New types of insurance have evolved throughout American history as new risks (such as the car) have emerged.
  • In the late 19th century, scandals and shady practices rocked the young insurance industry.
  • Under the McCarran-Ferguson Act of 1945, insurance companies are exempt from most federal regulations and are subject to state law.
  • Over the past few years, the internet has had a huge impact on how insurance is sold and how insurance companies evaluate the risk.


Property insurance was certainly not an unknown concept in the 18th century: the famous insurer Lloyd’s from London in England was born in 1688. But it was not until the mid-1700s that the American colonies became prosperous and sophisticated enough to adopt the concept. It happens in Philadelphia, then one of the largest cities in North America, with 15,000 inhabitants.

Fears of fires plague the city. Like London in the 1600s, houses at that time were made almost entirely of wood. Worse, they are built close together. This was originally done for safety reasons, but as cities grew, developers built houses very close together for the same reasons they do today – to place as much as possible on their plots. Although much of Philadelphia was built with wide streets and brick or stone structures, flames were still a concern.

In 1752, Benjamin Franklin and several other prominent citizens founded The Philadelphia Contributionhip for the Insurance of Houses from Loss by Fire, based on a London firm. The first fire insurance company in America, it was structured as a mutual insurance company, and Franklin advertised it in The Pennsylvania Gazette (which he owns). Like modern insurers, the company has sent inspectors to re-evaluate properties whose owners apply for coverage and reject those that do not meet the standards; rates are based on a risk assessment of the property. The contribution issued seven-year policies and claims were paid from a capital reserve fund.


The Philadelphia Contributionhip sets new standards for construction because it refuses to insure properties considered fire hazards. The criteria are used to evaluate buildings would one day evolve into both building codes and zoning laws.

Seven years later, Franklin was also instrumental in making the US’s first life insurance company, the Presbyterian Ministerial Fund, from the ground up.

The then various religious authorities were furious about the practice of giving human lives a dollar value. Still, their criticism cooled with the realization that the payment of death benefits worked to protect widows and orphans. The Industrial Revolution then brought the need for both business insurance and disability insurance to companies and individuals.

Throughout American history, the types of insurance companies have offered have expanded in response to new risks. In 1897, for example, the travel insurance company sold its first car insurance policy, and in 1919 its first cover for aircraft liability. As modern life became more complex, new types of insurance continued.


With the rapid growth of insurance companies and insurance products at the end of the 19th century, the young industry was soon plagued by fraud and dubious practices. Scandals ranged from companies selling policies without having the capital to pay their claims (rather working like Ponzi schemes) to insurers who have ruthlessly forced out competitors in an attempt to create a monopoly. Many states passed laws to address the problems, but in the early 1900s, abuse flourished.

In 1935, the Social Security Act came into force, providing old-age assistance and allowances to countries for unemployment benefits. Taking away some of the territories from the insurance companies sent a clear signal encouraging the industry to start regulating itself for fear of more government involvement. World War II caused a wage freeze, and employers, desperate to attract the workers still in the country, began offering group life and health insurance as benefits to employees. These large policies are usually offered by companies large enough to afford them and provide a substantial pool of insured workers.

As a result, the big insurers’ power increased, and the little guys starved, along with most flight operators. In 1944, the Supreme Court ruled that the insurance industry should be federally regulated. However, Congress passed the McCarran-Ferguson Act in 1945 and again brought state-level oversight. To this day, regulatory control remains primarily at the state level.

Meanwhile, the big insurance companies are growing in size, especially as they merge and with other giants in the financial industry. Now many of these companies offer a range of financial services that go far beyond insurance.


The growth of the internet has driven the biggest change in the US insurance industry in recent years. Insurance buyers are increasingly going online to buy a cover, and insurers have consequently changed many of their sales and underwriting practices. The global reach of the internet has also led to further mergers between financial services companies as they increasingly compete in a global market.

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