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Insurance is an interesting concept. We pay companies to help lessen the risk in a world where anything can happen. If something happens to your car, you may not be able to get to work, and you can face up against hundreds to thousands of dollars worth of fixing fees or having to get a new car altogether. Insurance allows us to live with less of that risk by paying insurance companies to partially or fully pay the amount it would take to repair (or sometimes replace) the vehicle. The way they make money is that in reality the worst isn’t going to happen immediately, so by the time the company has to come in with compensating for a damaged car, it has already charged more than enough to make up for it. They also calculate how much to charge in advance based off how likely it is that something bad will happen. There are pretty common insurance plans that most people have heard of, including car insurance, health insurance, and life insurance, but what if you have an asset that’s important but not something that’s commonly insured, like a specific body part? That’s where Lloyd’s of London comes in.
Lloyd’s of London has perhaps one of the coolest origin stories I’ve ever heard when it comes to something as seemingly drab as buying and selling insurance. Lloyd’s began as a coffeehouse in the 1600s. The coffeehouse was run by Edward Lloyd and was a place where sailors, merchants, and shippers came together (Good Neighbor Insurance). Soon, the establishment was a trusted source for shipping news and a place that you could buy cargo insurance (Lloyd’s). If you were about to embark on a long journey overseas, you could get your cargo insured in case of rough weather or pirates. Lloyd’s of London was a place for maritime shipping insurance until the early 1900s. After that, they officially began to spread to more than just shipping cargo insurance.
Lloyd’s of London is not technically a traditional insurance company. It acts more like a marketplace or platform to buy and sell insurance policies (sort of like how Facebook is a social media platform in that it allows people to connect to each other). If a business or person wants to insure something that isn’t traditionally covered by normal insurance policies (whether it’s too strange or risky to be insured), they contact a special agent that will get in touch with a Lloyd’s broker (The Balance). Then, individuals or corporations (often called syndicates) agree to write up an appropriate insurance agreement (a Lloyd’s representative or the syndicate may write the policy) and will sell it to the person wanting to insure something. Through Lloyd’s, you can insure virtually anything (though it can be extremely expensive). A common example is that celebrities will often insure certain body parts such as vocal cords for singers, legs and arms for athletes, or even boobs for actresses and models because damaging any of those body parts can mean that they’d be out of work for months, they choose to insure them (Trusted Choice).
The insurance business allows for us to have some stability and peace of mind in an unpredictable world. Most people have things like house or health insurance, but organizations like Lloyd’s of London can act as a platform to insure more out-there assets. It’s also exceptionally interesting how a business can go from coffeeshop to an international broker over the course of centuries. You really never know what the future will hold.