In the Western world, it was British merchants who originated property insurance. They developed the habit of passing the time of day in a coffeehouse located near the docks, named Lloyd's. The more daring merchants offered to finance potentially hazardous trade voyages; they coined the term " Underwrite" to describe this method of financing, so they became the first insurance underwriters.
Over Time, underwriters became more skilled at predicting losses so insurance rates could be standardized. Soon, individuals began to form companies to provide adequate protection for a larger portion of the population. The first property insurance company was established in London in 1667, the year after the city was almost obliterated by fire.
Benjamin Franklin established the first organized insurance company in the new World in 1752, the Philadelphia Contribushionship for the Insurance of Houses from Loss by Fire. The first accident insurance policy in America was sold in 1863. Soon after this, insurance against loss from burglary ( property
taken by forced entrance ) was offered and theft insurance to cover other forms of stealing followed in 1899. The first workers' compensation insurance was sold in 1910.
The insurance companies grew, both financially and in their understanding of how to share and manage risks. originally, it was the underwriters themselves who tried to interest people in buying insurance coverage, talking among their business acquaintances. However, this proved to be too time consuming when it came time to travel to attract new customers. So they appointed people to travel by horseback into the countryside to meet more people who might like to buy the coverage they offered. These were the first insurance " agents".
Generally, a person who buys an insurance policy is paying a small amount of money to receive the promise that, if there is a loss to the individual, the insurance company will pay for it. The funds to pay for the loss come from all the premiums paid by every person who did not have a loss, and earnings from the company's investments of the premiums.
Of course, it's more than just a promise from the insurance company: it's actually a legal contract between the individual and the company, a piece of paper detailing the coverage, its value and its limitations.