The History of Car Insurance


It is almost 115 years ago to the day that the first ever, car insurance policy was taken out by an American gentleman, in New York.

On February 1, 1898, Dr. Truman Martin of Buffalo paid $11.25 for a car insurance policy, which gave him $10,000 in coverage. According to Hemmings Daily, the doctor later went on to open a car service firm which tested the use of automobiles for postal delivery.

He was an unusual case. At this stage in time, no compulsory requirement for motor insurance existed, so hardly anyone had vehicle cover.

World War One

During the First World War in 1914, vehicles came increasingly into use, and people were trained to drive them during the conflict. However cars did not come into the price range of the average man until after the war, when hire purchase schemes became available.

That prompted a relative boom in the use of automobiles, and as cars became more common so did accidents, because driving standards and road discipline were very poor at the time.

The Road Traffic Act

To help compensate innocent crash victims who were left broke if their vehicle was written off, even if the accident was no fault of their own, the first ‘Road Traffic Act’ was formed in 1930.

The Road Traffic Act made it compulsory for vehicle owners and drivers to be insured for their liability for injury or death to third parties whilst their vehicle was being used on a public road. Although motor insurance had been around for a while, this was the first time it had become compulsory.

Changes In The Industry

Insurance was mainly done by ‘Composite’ insurers, who offered many different types of cover without specialising in one particular insurance. They had a monopoly on the business so could set pretty much whatever rates they liked. In addition all policies were more or less the same, though gradually companies began to divide themselves based on how much risk they were willing to take.

After World War Two insurance became an industry based on brokers who could deal with different insurance companies. Along with the development of financial services, this offered customers many ways to spread their risk.

The business expanded massively until suffering a major setback in the 1970s. The largest insurer of the day, Vehicle and General, collapsed without warning due to an excessive amount of claims following bad weather. This left a number of frustrated customers without policies and allowed new brokers to come into the market with products to offer them.

Car Insurance Today

Today car insurance has moved from being an industry built largely around masses of paper documentation to an online service. Customers can log onto the internet and get a car insurance quote within minutes. Where before there could be huge delays while paperwork went back and forth, now you can be covered almost immediately. If you want to be a part of the future of car insurance, contact GoSkippy today for a low cost quote.