A History of Home Insurance
Despite the fact that it is one of the most popular types of insurance available today, many people are surprised to learn that the modern concept of home insurance (or homeowner's insurance, as it is often known in North America) actually only dates back to the 1950s. That's not to say that the idea of insurance for houses didn't exist before then, only that it was radically different from the comprehensive packages available today.
Fire in London - the birth of Home Insurance
In the Early Modern period, fire was one of the greatest threats to homeowners, particularly in the crowded cities of Europe. The threat posed by fire in the seventeenth and eighteenth centuries is clear - The Great Fire of London in 1666 is estimated to have destroyed almost 90% of the city's homes. It's no surprise, then, that in the wake of this calamitous event the demand for some sort of financial protection against fire damage to property escalated greatly. Many independent brokers sprang up over the next few years and in 1681, the first insurance company in the world was founded in London, the Insurance Office for Houses.
The Insurance Office for Houses initially offered only fire insurance but within the space of just a few years, over 5,000 home owners had signed up to a policy. Other companies soon sprang up, such as The London Assurance, founded in 1720, and industry standards of a sort began to emerge. One of these was the practice of putting a 'fire mark' - a metal plaque stating that the building was insured - in public view in a prominent place on the house. These fire marks would signal to fire fighters that the house should be prioritised and was likely to be the residence of a wealthy person - fire insurance at this time was strictly the preserve of the rich and definitely not for everyone.
Home Insurance crosses the Atlantic
Over the next two hundred years, insurance companies began to add more and more services to the basic home insurance offering. Fire insurance was expanded to include other forms of property damage, as well as protection against theft and various other offerings. As the insurance market continued to expand and as it spread across the world, regional variations became more of an issue, particularly in the USA where insurance law often varied significantly from state to state. In the UK, the market was generally more standardised but many homeowners were locked into building insurance policies with their mortgage lenders, meaning that choice was limited and prices were often inflated.
Home Insurance in the Modern Era
The biggest problem in the USA, as well as regional variation in services, was that different insurance products had to be bought separately - effectively meaning that a different policy had to be taken out for each kind of damage that could happen to a home. From the 1950s, a shake-up of the insurance industry in the USA allowed homeowners to purchase all the required types of insurance on one homeowner's insurance policy, greatly simplifying the process. While the US insurance industry can still be confusing to customers, the changes of the 1950s have made it significantly more user-friendly.
In the UK, a law was passed in the mid 1990s allowing homeowners more freedom to choose their own insurance provider from 1995. This legislation opened up the insurance market, allowing new companies to compete and providing more choice and value for consumers.
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