History and Types of Insurance | Know Everything about Insurance

Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for money. Insurance Companies are an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium. The company’s gauranteed for the protection of the possible damages that occur unnaturaly; it is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Today insurance companies are developing making a huge difference in the capitalist society.


  • Early methods of transferring or distributing risk were practiced by Chinese traders as early as the 3rd millennia BC. These merchants travelling treacherous river rapids would cleverly distribute their wares across many vessels to spread the loss due to any single vessel’s capsizing.
  • Separate insurance contracts (i.e. insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed.
  • The first insurance company in the United States underwrote fire insurance and was formed in Charles-Town (modern-day Charleston), South Carolina, in 1732.
  • Insurance had become accepted practice. Farmers wanted crop insurance. Travelers wanted travel insurance. Everybody turned to insurers to buy peace of mind.
  • To make a long story short, insurance (today) is being conducted over a vast array of “lines of business” that encompass personal, commercial, marine, aviation, agriculture, life, health, financial and engineering insurance.

Objectives of Insurance

Countries and their citizens need something to spread risk among large numbers of people and to move risk to entities that can handle it. This is how insurance emerged. The primary objective of insurance companies is to function effectively.

 Insurance must satisfy a number of objectives including pooling risk, paying out claims, ensuring the solvency of insurers and incentivizing safe behavior. Insurance companies should guarantee the continuity and growth showing long term economic presence and significance.

Insurance Companies

Insurance is a tool which reduces the cost of loss or effect of loss caused by variety of risk. It is a broad aspect of risk in a changing dynamic; for the convinent management and understanding of the insurance companies it has been categorised into two categories according to the nature of interest.

  1. Life Insurance

Life insurance is a contract between the insured person and the company that is providing the insurance. It is a protection against the loss of income that would result if the insured passed away. There are various benefits that can be realized through the life insurance. Some of them are:

Mortagage Protection, protection against disabilities, children’s education, tax relief, marriage expenditure etc.

Life insurance is again categorized into different types.

  • Term life insurance

Term life insurance stays in effect for a specified period or until a certain age of the insured.

  • Whole Life insurance

Whole life insurance normally covers an individual until his or her death, unless it lapses due to non-payment of premium or is cancelled.

  1. Non Life Insurance

It is also known as General Insurance. Insurance mainly concerned with protecting the policy holder from losses or damaged caused by specific risk.

The categorization of non life insurance is dependent upon the need level.

  • Property/casualty Insurance
  • Health and Disability Insurance
  • Business and Commercial Insurance

Various types of non life insurance are commercial, marine, aviation, agriculture, health, financial, engineering insurance, travel insurance, home insurance etc.

Insurance Companies in Nepal

Insurance is a newly emerging business in Nepal. Therefore, the history of insurance business is definitively very short in Nepal; as the first insurance company, Nepal Mal Chalani Tatha Bima Company Ltd.was established in 2004 B.S.

As a private insurance company with limited capital, the Nepal Mal Chalani Tatha Bima Company Limited was not successful to provide all types of insurance facilities all over the country. Then immediately, the HMG established Rastriya Bima Sansthan under the Insurance Act 2025.

After reestablishment of democracy, Nepal also implemented the policy of privatization and economic liberalization and globalization and new Insurance Act 2049 was introduced. At present there are 25 insurance companies in Nepal.

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