Ben Franklin: Father of Modern Insurance
As one of the preeminent founding fathers of the United States, Benjamin Franklin has been heralded with many great achievements. A few of his distinguished achievements include serving as the nation’s first Postmaster General, making significant discoveries regarding electricity, and inventing bifocals.
But perhaps one of his greatest contributions to the United States is also one of his least known accomplishments.
After a great fire devastated Fishbourn’s wharf along the Delaware River in 1730, Franklin knew the event could have been much better contained by organizing the area’s available firefighting resources. This led him to create the Union Fire Company. The country’s first volunteer firefighting department.
However, the new department wouldn’t be able to prevent fires from occurring at all. To protect the financial interests of the residents, Franklin established the first insurance company in America, naming it the Philadelphia Contributorship.
The First Policies
Although it took more than twenty years after the fire of 1730 to be formed, the new insurance company issued its first policy in 1752. Franklin was a supporter of the mutual insurance concept and the Philadelphia Contributorship was established in this way.
As a member of the board, Franklin set forth the terms of the contributorship bringing together members to write 143 policies. Each policy provided coverage for a single peril, fire. Equal payments were paid by each member and had a loss occurred; the funds would have been used for payment.
The policies were written for a term of seven years. During those seven years, not a single claim was made. And, as written within each fire insurance policy, members were returned their premiums. a feature no longer available in today’s marketplace.
A Forward Thinker Frankin’s work with the Philadelphia Contributorship launched the nation’s insurance industry, which now exceeds $1.3 trillion in annual premiums. Today’s marketplace includes many other forms of insurance Franklin proposed nearly 200 years ago including life insurance, annuities, and crop insurance. Each of these is now an important financial instrument used in protecting millions of Americans and their assets.