According to today’s source of all modern knowledge – Wikipedia – insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. In legal and economic terms, it is a form of risk management, primarily used to hedge against the risk of a contingent loss (also Wikipedia). Of course anything that’s related to the law or the economy needs to be written in such a way that it intimidates the reader and also in a manner in which no one ever speaks. If it’s real official sounding, people are less likely to question its value and more likely to pay their liability insurance premium on time.
Ironically, it appears that the first insurance company began as a result of the Great Fire of London in 1666. Also ironically, the fire was the most exciting thing to happen in the entire history of insurance. In 1667, wealthy Londoners who stood to lose financially if their interests were to burn in another London fire, started insurance companies as a method of bankrolling individual fire companies and providing “liability insurance”. In this way, those who contributed to the insurance/fire company would have their property – and their investments – protected. The longest operating insurance company was founded in London in 1710 and still operates today – though through many, many mergers and acquisitions later.
For insurance companies, the glass is always half full. People who make a career of focusing on risk aren’t a cheerful or optimistic lot and can usually be found looking for exits and making a personal escape plan in the event of a fire on the rare occasions they are invited to – and actually attend – cocktail parties.
Insurance companies are so concerned with risk, they even insure themselves with other company’s insurance . It’s called reinsurance and it’s big business. Bermuda is one of the largest centers of the insurance and reinsurance industries which proves that insurers may be boring, but they enjoy their pink-sand beaches and rum swizzles.
So, to re-cap, insurance is, by its nature, a risky business. The concept rose from the ashes of a disaster, has been around for nearly 500 years and, with re-insurance, is just a huge corporate pyramid scheme – that is focused on risk and risk management. I bet their tables are real busy on career night.