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 The guilds of Medieval Europe marked a very interesting transition in the historical development of insurance practices, to which even the very modern car insurance groups find origin: they connected the ancient systems of very privatized insurance structures, which were only available to the very rich (and often used explicitly for the purposes of insuring against commercial ruin), to the modern systems which provide insurance on large scales to nearly all citizens of the developed world.

As an atomized Europe reformed itself after the fall of the Roman empire, the formation of guilds became a widespread practice.  As early as the fourth century, craftsmen began organizing themselves into cooperative units that provided mutual protection from commercial ruin, among other benefits.  Craftsmen paid dues to their guild, which in turn insured them against fires, and the many other disasters of medieval life.  As the guilds grew more opulent over the centuries, they tended to expand their benefits (and their regulations).  By the twelfth century, guilds had taken a form that somewhat resembles modern-day corporations.  The hierarchical structure had become very extensive, with longer apprenticeship periods, and higher ladders of rankings than had previously existed.  Guild dues increased, and covered not only commercial damages, but also the costs of care for elderly members, as well as widows and orphans of guild members, funeral benefits, and travel expenses.

This development was very useful for the time; the emerging middle class had access to many useful services that were previously unavailable in any fashion to them.  The limitation of this structure came not from the producers’ viewpoints, but from the consumers.  By the late eighteenth century, the guilds were a powerful political force that lobbied for protectionist tariffs against non-guild members within the city.  Early liberal writers such as Adam Smith argued that the laws they produced were not conducive to competition, innovation, lower prices, and were accordingly not in the best interests of the people as a whole.  The guilds were also becoming challenged by competition in new markets that were being created by the Industrial Revolution.  Over the course of the nineteenth century, the guild systems fell across Europe, and were replaced with free trade laws, leaving the workers to once again fend for themselves.

The advantage gained to the lower and middle classes was that the new market system forced certain prices lower, creating demand for insurances that had previously been available only to the very wealthy, which helped accommodate their new capital acquisitions.  When the Model T rolled off the assembly line in 1908, car insurance groups were readily in place with policies for sale to accomodate consumers, who were able to purchase them independently of the wills of the corporations they worked for.  The combination of anti-trust laws and a surplus of competition also keep car insurance groups from achieving the monopolistic structure that the early guilds used to have.

This Financial Services article was written by Mark Karavan on 10/14/2009

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