Although the insurance policy as we know it is a relatively recent development, the concept is by no means new. The idea of transferring the risk of loss from an individual to his group began thousands of years ago. When a family's hut burned down, for instance, the entire tribe would rebuild it. Traces of rudimentary insurance practices are still seen among the few primitive tribes that exist today.

About 2500 BC, Chinese merchants were using primitive forms of marine insurance. When boat operators reached river rapids they waited for other boats to arrive, before redistributing the cargo so that each boat carried some of the contents of the others. If one boat was lost navigating the rapids, all the operators shared a small loss but nobody had their entire cargo wiped out.

Benevolent societies were developed in Egypt as early as 2500 BC. There is evidence that the ancient Egyptians had writings on the walls of some of the temples in Luxor (Upper Egypt) and that they formed committees for burying the dead. They believed that life after death was inevitable and therefore the body should be preserved for the spirit when they were reunited at the time of reincarnation. That led them to spend prodigiously when death occurred and even before that to build tombs suitable for the preservation of the body. Therefore the committee spent the money needed to preserve the body after death for as long as that person or his relatives paid an annual fee. This annual fee could either be in the form of agricultural produce or manufactured goods and clothes, sufficient to ensure that the body would be preserved in a wellsealed tomb (organized primarily for religious and social purposes in the hereafter). However, members contributed to funds that paid burial expenses and gave aid for those seriously ill or injured by accident.

By 1500 BC, these same societies provided fire insurance. The biblical story of the Prophet Yusuf (Joseph) is another early illustration of insurance principles. Around 1700-1500 BC, according to the authorities, Yusuf interpreted a dream of the Pharaoh to mean that there would be seven years of plenty and seven years of famine. At Yusuf's suggestion, the Egyptians set aside grain during the years of plenty to prepare for the years of famine. Although this was cooperative (and, owing to Yusuf's certainty, could possibly be described as acting on foreknowledge rather than preparing for risk), it is an indication that human societies have been involved in insurance as far back as the ancient Egyptians. Today, people set aside a little to protect themselves against possible future emergency or loss.

The Phoenicians, Greeks and Indians took another major step in laying the foundations for today's insurance industry when they developed insurance against a ship's sinking. When a group of shipowners financed a commercial voyage, they borrowed money from a lender, using the ship as collateral. If the voyage was successful, the shipowner repaid the loan at a high rate of interest. If the ship was lost, the shipowner was free of the debt.

Ancient Romans had both life and health insurance. The Collegia, Roman benevolent societies, provided burial insurance and financial help for the sick and aged. Roman guilds issued life insurance contracts for members and by AD 200, the Romans had a rough mortality table. The Roman military also had health and disability plans.

When guilds arose in Flanders and Holland, among the services they provided were sickness benefits and burial fees. Some guilds made efforts to reimburse members for fire losses. Although their methods of operation were unsophisticated by today's standards, they popularized insurance. During this period, insurance was underwritten mainly by individuals and guilds. Benefits were relatively low; one person or a small group could have enough capital to conduct insurance business. The person selling insurance was called an underwriter, signing his name and the amounts of liability at the bottom of the page. Ibn-Khaldon, in his Muqaddimma (Preface) has written about Arab business ventures which were then known as Winter and Summer Voyages. The voyage members indemnified any member of the group against loss of either their stock or their profit. All members of the voyage paid a percentage either of their profit or capital as compensation for the loss or damage sustained by any member of the voyage.