In 1666, the Great Fire of London nearly destroyed the city, but from this the first insurance company—as well as the first fire brigade—emerged from the ashes.
The Great Fire started early in the morning in a baker's shop in Pudding Lane, and quickly spread.By the time it was over, London was devastated. Four-fifths of the city lay in smoldering ashes. England's biggest city—containing roughly two-thirds of the wealth of the empire—was ruined. Over 13,000 buildings were destroyed, mostly homes but including many churches and commercial establishments
Setting the Stage
In the aftermath of the Great Fire, a number of laws and ordinances were passed directly related to the fire that attempted to eliminate such devastation from future fires. One law, for example, required that each quarter of the city be provided with 800 leather buckets and 50 ladders, as well as other firefighting equipment. Each house had to have buckets, and the occupants were required to participate in hand-to-hand bucket brigades.
Another law allowed for the incorporation of an organization to indemnify for losses due to fire. This one set the stage for the first insurance company.
Nicholas Barbon's Influence
Somewhat earlier, Cromwell's parliament had been nicknamed "the Barebone's Parliament," due to a particularly notorious member, Isaac Praise-God Barebone. Praise-God Barebone was a deeply religious preacher, and he named his son Hath Christ Not Died for Thee Thou Wouldst Be Damned Barebone. The son later changed his name to Nicholas Barbon.
By the time of the Great Fire, Nicholas Barbon, M.D., was a successful doctor but was already starting to make a name for himself as a prolific writer and economist. He got involved in the reconstruction of London. As he amassed his own wealth―many of his writings had to do with wealth, value, and similar topics―he began to worry that his wealth was tied up in property that could burn in another fire.
In the year following the fire, 1667, Dr. Barbon was instrumental in forming the first actual insurance company. It was known as "The Insurance Office" and was located in a small office behind London's Royal Exchange (stock market).
The Development of Fire Brigades and Firemarks
To protect the houses and other buildings it was insuring, The Insurance Office formed actual fire-fighting teams. They were issued equipment and identifying badges. Their job was solely to put out fires in the buildings they insured.
Other insurance companies followed. They had names like the Friendly Society and the Hand-in-Hand, and they also employed their own fire departments.
As Alwin Bulau points out in his seminal insurance historical book, Footprints of Assurance, these company-owned brigades were not there for the protection of the public, they were specifically employed by their respective insurance companies. When a fire occurred, all the nearby fire brigades would rush to the fire, just in case it was their company that insured the building. If it wasn't, they'd either leave or, more likely, stay to watch as observers.
It became obvious that there had to be a quick and easy way for these brigades to be able to identify the houses and buildings that their employers insured. The various insurance companies began issuing signs, called "firemarks," to their policyholders. In England, where this all began, most of the firemarks were made out of tin. The company would issue them, and the policyholder would mount it under the eaves in the front of the house.
At best, the whole idea of insurer-owned fire departments was cumbersome; at worst, it was downright disastrous. Company A's fire department might watch a house insured by Company B burn today, and next week Company B's department might watch one of Company A's go up in smoke. Not very efficient.
The solution, of course, was to have municipal―not private―fire departments. A deal was worked out, and all the insurance companies donated their equipment to the city. The city hired the firefighters, who were stationed at various locations around the city. Their job was to fight fire, whether the building was insured or not.
That didn't eliminate the need for insurance, of course. Nor did it eliminate the need for firemarks, which continued in use. Given the choice of buildings to save, the firefighters would always attempt to save an insured building before an uninsured one. It was customary for insurance companies to pay for ale at the local pub for any firefighters who attempted to save their insured property and to provide bonuses for those who were successful at it.
So, what happened to the first insurance company, The Insurance Office? Well, nobody is exactly sure, but it eventually went out of business. The oldest documented insurance company today dates back to 1710. Originally known as the Sun Fire Office, it started not all that long after the original Fire Office, and probably while the first was still in business. The Sun Fire Office, through many mergers and acquisitions, is today known as Royal & Sun Alliance, Britain's largest insurance company.