The history of home insurance in the UK
History of Home Insurance-The insurance industry in the UK started many years ago in about 1688. Owners of ships, and seaman would often meet up to discuss and make business plans. In a coffee house in London, owned by Edward Lloyd, these merchants and owners would learn about the weather forecast and state of the seas, and whilst in Edward Lloyd’s coffee house many agreements were made concerning ownership of cargo and ships. “What ifs” were played out and catastrophes imagined. It was necessary to make arrangements and plan contingencies to ensure that merchants did not lose all their investments tied up in cargo and ship owners did not lose their source of wealth if their ships went down and were taken by the sea.
London Trade – Long after Edward Lloyd died, these seaman and business men alike continued to meet and make business arrangements concerning ships and cargo. The business took on a form that saw this meeting place move to Lombard Street, London. Once the committee was formed, the meeting place moved again, this time to the Royal Exchange, again still in London. In fact London still is considered to be the centre of the global insurance trade. For at least one hundred years,insurance business was transacted through The Society of Lloyd’s that concentrated on marine cargo and ship insurance, and as much of the trade in the 1700s and 1800s centred around the slave trade, this is where insurance was focused. Much occurred over the years, that widened the membership of The Society of Lloyd’s in order to take advantage of tax changes but continue investment into the Society to ensure that risks were correctly and effectively underwritten. Members were able to join that were non British citizens and a number of passive members joined. A legal framework was required to maintain order and liquidity of the “Names” or members as they are otherwise known, but this still did not stop a number of “Names” going under and losses outweighing profits.
Changing Nature of Insurance – In recent times just 20 years ago, many liability and long tail claims were being made against employers by employees and ex employees of companies who utilised such substances as asbestos. The nature of this material meant that many of the illnesses and diseases caused as a result did not come to light for many years, and therefore insufficient reserves placed a strain on insurance funds and reinsurance. The same has become true of pollution claims, and environment insurance policies are becoming extremely big business where requirements, many of them legal, force companies to meet strict regimes in meeting pollution (or non pollution) targets, and if these are not met and clean ups are necessary, this costly expense can be met through invoking an insurance policy. All of these have been underwritten by Lloyd’s of London.
Types of Insurance – of course, although insurance in London began with Lloyd’s of London the methodology of pooling reserves of many to pay for claims of few, was recreated throughout financial corporations who took insurance out beyond marine and cargo insurance. The types of insurance available in the modern insurance market is wide and varied, however in the main general insurance underwritten by insurance companies, financial institutions and the like is restricted to mainstream insurance such as : motor, household, holiday home insurance, liability, and creditor insurance. Traditionally the Banks have had the monopoly of creditor insurance which tends to be sold when the debt is sold to customers such as bank loans, overdrafts and mortgages. The life element of creditor insurance however is not a general insurance offering, and is subject to different tax regulations. Motor insurance is mandatory in the UK and Europe and insurance covers the driver and owner of vehicles against damage to the vehicle and third party liability insurance providing cover against damage to others property or person (personal injury). There are many add-ons to motor insurance which in effect are not insurance, such as motor breakdown cover and uninsured loss recovery. Household (property) insurance is a personal lines insurance, however in much the same way, commercial property is covered against the risk of fire, flood, storm, theft, malicious damage, and accidental damage. As more people are owning more than one home, it is ever more important to insure against damage whilst the property is not occupied. These homes can be let properties where a residential buildings policy is required, as the owner is a landlord, which requires specific insurance to meet a landlords needs, such as rent guarantee, a small element of landlords contents cover, or full landlords contents cover if the property is let furnished. Underwriters will tend to exclude certain covers, for example theft, if there has been no forcible and violent entry or exit. Holiday homes provide another risk for underwriters to assess that although on the surface are similar to that of insurance for property in the UK, where holiday homes are situated other than in the UK, the local market has to be taken into consideration, and also the peculiarities of the geography of a country or region.