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The History of Car Insurance

By: Angelo Ilumba February 1, 2015
Two women discussing paperwork
The History of Car Insurance

While the majority of adults are required to have car insurance, many of us are unaware of the how and why car insurance ever came to be.

We’ll discuss how insurance began and the history of auto insurance.

The Beginning of Insurance

It is believed that the concept of insurance is as old as humanity itself. Insurance policies can even be traced all the way back to ancient Babylonia when merchants who had loans paid lenders an additional sum to provide a guarantee against losses if their commodities were lost or harmed during shipping.

Here in the U.S., Benjamin Franklin is credited for kickstarting the insurance industry when he formed Philadelphia Contributionship, which was the first company in the country to offer fire insurance.

Of course, as societies have grown and advances have continued throughout various industries, insurance has had to adapt to all the changes. Now it seems you can insure almost anything. For our purposes, we’re going to focus on the history of car insurance.

The Arrival of the Car

Clearly, there is no car insurance without the car.

While the advent of the horseless carriage was a source of great excitement in the late 19th century, as more and more automobiles started hitting the roads, one thing was bound to happen: more and more accidents occurred.

This, naturally, led to arguments over who was responsible for injuries and damages to property that were a direct result of these accidents.

Travelers and the First Car Insurance Policies

Travelers is one of the biggest names in the insurance industry today. It is not surprising that they had their hands on the beginnings of car insurance in America.

Gilbert L. Loomis

Because Ohio was at the center of automobile development in the late 19th and early 20th centuries, many vehicle-related firsts happened within the state.

One of these firsts occurred in 1897 when Gilbert L. Loomis, perhaps spurred by the legal hassles that recent car crashes seemed to be causing, bought an insurance policy from Travelers Insurance Company for his car.

This policy is widely considered the first car insurance policy even though it technically was written as a horse and carriage policy. It covered Loomis in case he hurt someone in an accident or damaged their property.

Dr. Truman Martin 

Having broken ground a year earlier by providing Loomis with coverage for his car, Travelers decided to start writing policies that were car insurance policies by name and not just a type of horse and carriage insurance.

The first of these policies was bought by Dr. Truman Martin in Buffalo, New York in February of 1898.

Multi-Line Car Insurance Policies 

It didn’t take long for Loomis’ purchase of liability insurance before his choice caused a domino effect. Soon, more car insurance policies were purchased, but it wasn’t until 1902 when the first fire and theft policy was purchased for an automobile.

This was the first non-liability policy written for a car.

Of course, this brought about other types of auto insurance coverages and soon multi-line car insurance policies were written that resemble polices we have today with coverages such as collision and comprehensive.

Car Insurance Becomes Law

As more people started driving cars, more accidents started happening, along with more legal disputes.

The biggest issue that came from all of this was that even after fault was determined in an accident, there was no guarantee that the at-fault driver would be able to pay for the costs associated with that accident.

This issue kept growing in severity until finally someone had to step in.

In 1925, the state of Connecticut became the first state to adopt a financial responsibility law.

Under this law, owners of cars had to prove that they could pay for any injuries or property damage they cause to others in a car accident. While there was more than one option to prove financial responsibility, the easiest and most accessible way was by purchasing liability car insurance.

Connecticut’s financial responsibility law only required drivers to prove their financial responsibility after their first accident.

The state of Massachusetts also felt they had to do something about all the car accidents and legal troubles that followed so they, too, established their own financial responsibility laws.

However, Massachusetts’ laws required that driver prove their financial responsibility as a requirement for their car registration. This is what is considered a compulsory insurance law and is what the majority of us now have to face in our respective states (with very little exception).

Car Insurance Today

If history has taught us anything here, it is that if you have a car, you need auto insurance. Cars are big expensive machines that are driven at fast speeds. Accidents will happen, and protection is essential.

Luckily, getting car insurance does not have to be a hassle. Today’s world of car insurance allows us to easily shop for insurance by getting quotes online. Not to mention, all the car insurance discounts available out there that can help you save big on your premium.

 

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