A Brief Yet Interesting History of Vehicle Insurance

You’ve heard a lot about vehicle insurance products and all. But did you know that the concept of vehicle insurance goes back thousands of years right to the beginning of civilization? Feeling intrigued? Read on.

In the 21st century, insurance is ubiquitous. Health insurance protects us from being swamped by medical bills. Home and property insurance protect against natural disasters like fires, floods, and earthquakes. We can even insure our pets, smartphones, and weddings, to name just a few more unique examples. However, perhaps the most common type is that of car insurance, and all the specialized versions of it, such as no money down car insurance. Not only is it required by law in 49 states, but most Americans own or lease a car.

Car insurance agent explaining coverages

While automobiles are just barely over a century old, the history of vehicle insurance goes back thousands of years to the beginnings of civilization. It has evolved quite a bit since then.

Ancient Converge

At least 3000 years ago, people were trying to recoup their losses when it came to vehicle disasters. It began with Chinese river ships carrying goods across the country. Initially, merchants would split their goods among several ships. Each one carried fractions of cargo from several different merchants. This diluted every disaster so that one lost ship didn’t completely wipe out someone’s supplies and profits. This soon expanded as trade spread across oceans and risk increased. Chinese investors formed groups that would charge a premium in order to protect the cargo going in and out of port.

This practice spread rapidly across the ancient world. No matter where you went, merchants bemoaned their losses whether it was due to piracy, theft, or natural disasters. Every shipwreck could mean total ruin for an ambitious businessman. Thus, civilizations everywhere created their forms of vehicle insurance.

The Babylonian empire included a policy known as “bottomry” in its written laws. Merchants could take out a loan to finance the shipment of cargo. When the shipment arrived, they would pay back the loans with interest. However, if the ship or goods were lost along the way, they did not have to pay back anything.

Dutch merchant ship Fluyt
photo credit: Wencesclaus Hollar / Wikipedia

Medieval, Renaissance, and Enlightenment Coverage

Over the centuries, as trade continued to expand across the old world, the need to insure greater and more valuable sums began to rise. Thus, beginning in Denmark, guilds were formed from collectives of businessmen looking to develop a more robust type of insurance to cover bigger and longer shipments.

This practice spread to the wealthy trade ports of the Mediterranean, and insurance contracts were written in cities like Genoa, Florence, and Venice. Investors and merchant groups pooled money and then charged premiums for protection against disaster. The first written contract is thought to have been made in 1343 in Genoa. This was just a few years before the plague hit Europe. There was clearly plenty to protect against.

By the 1600s, probabilities and risk were being calculated so that insurers could price their policies to specific circumstances. Insurance could be treated like science, and by the early 18th century, Lloyd’s of London formed to become the first marine insurance company. They had lists of customers, ships, and value estimations that helped them create custom policies for clients in need of protection.

Car Accident at Broadway & Renfrew St., 1951

Car Insurance

Throughout the industrial age of the 19th century, the idea of insurance was expanding to all parts of life from medical fields and financial markets to legal issues. When Karl Benz invented the first modern car in 1886, it made perfect sense that car insurance followed soon after.

The first-ever recorded car accident in the United States occurred in 1891. James William Lambert and James Swoveland were driving through Ohio City, Ohio when their car lost control after hitting a large tree root in the road. They slammed into a hitching post but luckily only had minor injuries to deal with.

Just 6 years later in 1897, Gilbert J. Loomis saw the dangers a car presented after building his own. Early automobiles had virtually no safety features, and there were few laws that protected drivers and pedestrians from accidents. Thus, he went down to Traveler’s Insurance in Westfield, Massachusetts, and took out an instant car insurance with no deposit on his car.

After Henry Ford’s Model T hit the market, cars became commonplace across the United States. However, infrastructure and the law had yet to catch up with the automobile revolution. By 1925, drivers in Connecticut who caused car accidents resulting in $100 or more in damages were legally obligated to pay restitution. This took the form of at-fault liability insurance or other means of payment. In 1927, Massachusetts took this a step further, and liability coverage was required for all drivers. It was the first state of many states to pass such a law.

In 1930, 85 people a day were dying from car accidents. The automobile industry, infrastructure, and laws were trying to catch up as quickly as possible. More and more drivers on the road gave rise to an entirely new industry for insurance. By the end of the 1930s, there were official agents, and companies were basing their rates off of vehicle types, mileage, and driver’s ages.

By the 1950s IBM computers were storing and tracking all kinds of data for a particular type of car insurance, and special discounts were being offered. Driver’s that demonstrated safe practices and driving skills could receive better prices on coverage. Vehicle safety measures were hitting the scene and by the mid-1960s seatbelts were required. Laws were passed to further protect drivers and pedestrians.

Since 1927, nearly all 50 states have enacted mandatory car insurance laws. The only hold-out is New Hampshire. Nevertheless, they still require that drivers prove their ability to pay for damages when they are at fault.

Car insurance policy coverage


Vehicle insurance has been a part of human history longer than our ability to write down a specific law or policy. We have always been looking to mitigate and dilute risk, both for financial security and personal safety.

Car insurance has been no different. From the moment the modern car was first invented, humans quickly wrecked one and then just as quickly insured against further accidents.

As technology grows in the 21st century, auto insurance will only refine and improve. Before long, a new vehicle may revolutionize civilization again. You can bet a new form of insurance will be following close behind.