History of Insurance Essay
These employees were not parties with the employer, but simply servants, incurring no liability and being entitled to no share in the profits. It became necessary for the markets to extend since the output became more than enough to satisfy the needs and wants of home markets. It was necessary to use other methods of sending their goods to foreign trading centers. Consequently, it became customary for the manufactures or financer having large stocks of goods or money on hand, in addition to employing his own travelling salesmen, or agents as described above, to find an equivalent to the modern commercial traveler. So, he entered a long term business relationship with a “Darmatha” (a sort of hawker or a trader by caravan) and supplied him with goods or money which made the trader by caravan make a trade tour. This trader gave as security for the loan “himself, family and property, in town or country, on the road, or in stock.” The interest rate or bonus he paid was either half his profits, if the said half exceeded 100 % of the loan, and if it did not he paid as a minimum 100% on the loan, or 100% of the loan only whatever his profit or loss might be, in addition in either case to refunding the capital value of the goods advanced.
This robbery of caravans must have happened frequently at the time when both brigandage and piracy were considered a far more honorable means of earning a living than trading, and especially when the trading journey was carried among the less civilized people.
The result was that many of the traders together with their families who were unable to deliver the goods became the property of principles. This meant that the principle could sell the family as slaves or even kill them. Soon this became intolerable, and eventually the parties came to a compromise. The merchant advanced goods to the trader, and in return he received a sealed inventory containing the entire value of the products. The rated on interest together with the security remained the same. However, in the case of robbery or other unfortunate events the trader had to give back the capital borrowed and the interest.
Between 1600 and 1000 B.C. Phoenicia was seen as the great maritime power of the Mediterranean. In 1600 the towns forming Phoenicia, were enjoying an independent and large commerce with Sidon being the most important town. Sidon or Saida is the third largest city in Lebanon, and it is located in the South Governorate, on the Mediterranean coast (Ikamalebanon 2009) It was necessary for Phoenicia to expand as a sea trading nation and to establish trade centers. Soon it became the link between three continents. In order for Phoenicia to develop a wide trade it was necessary to found colonies for the merchandise in different countries along the Mediterranean.
It is important to mention that the Phoenicians acquired from the Babylonians the knowledge of contract. The Babylonian trade was more on land while the Phoenician trade was maritime, and so the Greek contract derived from the Phoenician one.
We can conclude that the trading customs of one nation would influence the trading customs of another nation. Babylonia used to do trade with India, and the Hindus together with the Babylonian traders were always making business contracts. Indians showed a great deal of interest in trade, because of the example set by the Babylonians. They acquired their knowledge of business habits but also to laws used for loans together with the interest rates and so on. All these rules were set in the Babylonian code. These laws were tailored in order to suit their own conditions and requirements, and as a result somewhere before the 6th century B.C. they developed an elaborate form of contract such as:
* The contract applied to land traffic as well as sea-borne.
* The interest was according to the risk involved and the period of time over which the money was required.
* The interest rate was always specified in the contract.
* In the contract the borrower was excused of payment in the case of robbery and if the goods arrived in bad conditions at the time and place agreed by both parties.
At the very beginning the Romans resumed their contract almost only to land-varied goods. The legislation of the contract of loans was almost identical to the Greeks. However there were a few minor differences such as:
* The limitation of the event the lender is responsible for the loss.
* The entire freedom from liability of the borrower is so far as any collateral security given by him was concerned in the event of the goods on which the loan was actually made having perished.
Very soon this type of contract became popular among the Romans, since it gave the opportunity to rich gentleman to invest their wealth at high interest rates, and at the same time it gave borrowers favorable circumstances of increasing the trading capital but at the same time ensure him against the outcome of a total lost.
According to Trenerry (2010) there is a small amount of Roman classical literature concerning business issues. Although there are few references concerning trade customs it appeared that the Romans had the knowledge and put in practice some of the following methods of providing against maritime and other types of risks:
* Public indemnity to shippers and against loss of ships or cargo from storms and attacks on enemies.
* Guarantee for the safe delivery of goods.
* The Emperor guaranteed against some losses due to bad weather conditions such as storms.
* Insurance by wager.
Trenerry (2010) argues that “In the case of the guarantee by the Republic against the risk incurred by certain trading companies who offered to supply goods to the army in Spain, Livey states that in about 215 B.C., there was an urgent demand from the Sciopies who were in Spain, for wages, clothes and food for the army, and also for all kinds of stores for the naval aliens.
The main debate on this matter was whether this type of contract was a contract of insurance or not. The main arguments ware about:
* The ownership of the suppliers during the journey.
* The liability of both the government and the shipper for the losses incurred during the transit.
* Whether the guarantee was a voluntary promise of indemnification made by thegovernment for the full benefit of the state’s citizens, and not in return for a valuable consideration, or a contract of insurance against the stipulated risks guaranteed by the government in exchange for a valuable consideration paid or payable.
The points stated above are considered fully in accompanying thesis, and the conclusion is that in 215 B.C. the Roman Government undertook in return for a valuable consideration to insure the safe arrival of certain shipments and supplies shipped by three private trading companies who were the owners. These suppliers were send from Rome, and probably other centers, over the sea to Spain, where they would be sold by and for the benefit of the shippers.