Understanding Insurance: How the Great Fire of London Explains Why Insurance Does What It Does

Did you know, modern insurance grew out of the Great Fire of London in 1666. When the fire left people with no way to recover their losses, an idea took hold: many people pay a little, so those hit by a loss aren’t left alone. In Alberta, the Automobile Insurance Rate Board (AIRB) regulates auto insurance rates, and basic coverage is required by law. Curious how your price is worked out? Check out AIRB’s auto insurance FAQs.

1666: The Fire Changed Everything

London in 1666 was wooden houses and narrow streets. One very unlucky spark and the great fire devastated the city and there was no safety net. Churches collected money across the country, yet it covered only about 0.13% of the damage, according to the Museum of London.

Lesson learned: hope is not a financial plan.

1680: The Fire Office (and the Original Sticker)

Nicholas Barbon opened the first fire insurance company, the “Fire Office,” in 1680. Homeowners paid a small amount and the company paid out if their house burned.

Insurers even issued a “fire mark,” a metal plaque on your house. Think of it as the world’s first “this home is protected” sticker.

The Plot Twist: Insurers Became Firefighters

Insurers found it cheaper to fight fires than to pay for rebuilds, so many hired their own fire brigades. Yes, insurance companies once ran the fire department. Prevention beats payouts, then and now.

Fast Forward to Alberta

Today’s idea is the same: share the risk. Here’s how it works:

• Basic coverage is required. Basic auto insurance (accident benefits and third party liability) is required by law. Collision and comprehensive are optional.
• Everyone can get required coverage. Under the Take All Comers (TAC) Rule, insurers have to offer coverage or quotes to any eligible driver who meets their filed underwriting rules.
• Your rate reflects many factors. Personal characteristics, vehicle type, coverage, deductible and insurer all play a part. Inflation, theft, fraud and weather matter too.
• AIRB. Regulates insurer’s rating programs. It doesn’t sell insurance.

And change is coming with Alberta’s Care-First system.

Summary

From a London fire to your car, insurance does one job: it turns one person’s big loss into a shared, manageable cost. Understanding what makes the whole system a lot less mysterious. Ready to explore? Compare rates at airbfordrivers.ca.

Frequently Asked Questions

Why does insurance exist? Insurance lets many people share the cost of a loss which would be hard for one person to cover. It traces back to the Great Fire of London in 1666 and the first fire insurance company in 1680.

Why is car insurance mandatory in Alberta? According to the Government of Alberta, basic automobile insurance (accident benefits, third-party liability, direct compensation for property damage or DCPD) is required by law. Collision and comprehensive coverage are not required but if your vehicle is financed your lender may require this coverage.

Who decides how much I pay for car insurance in Alberta? Insurers set their own rates, but AIRB approves their rating programs. AIRB doesn’t provide quotes or recommendations.

Why did my car insurance go up when I haven’t had a claim? Auto insurance operates as a shared risk pool. Premiums collected from all drivers are used to pay the claims of the relatively small number of drivers who are involved in collisions each year. When the cost of those claims rises, insurers must collect more premium from the overall pool to ensure they can continue paying future claims. This means that even safe drivers who have never submitted a claim can be affected by rising claim costs across the system.

According to AIRB, many factors affect rates, such as inflation, theft, fraud and weather. Changes in driving habits can also play a role.

How is car insurance calculated in Alberta? AIRB says your rate is determined by a combination of factors, including your personal characteristics and vehicle type. Coverage amount, deductible and insurance company also affect it.

Can an insurance company refuse to insure me in Alberta? Under the All Comers Rule, insurers can’t refuse required auto insurance, including third-party liability, to new or existing customers, except in cases serious cases of fraud or misrepresentation, or due to payment issues and outstanding balances owed.

What is a deductible? It’s the out-of-pocket amount you pay when you make a claim. AIRB says increasing your deductible can help lower your rates, as long as you can afford the deductible amount.

Can insurers use my credit score or income to set my rate in Alberta? No. Credit score, income and net worth are among the factors which can’t be used to set rates.

Who regulates auto insurance in Alberta? AIRB regulates auto insurance rates and approves rating programs.

Does AIRB sell insurance? No. AIRB is Alberta’s independent auto insurance rate regulator. Visit airbfordrivers.ca to compare rates.