The History Of Car Insurance

Connecticut was the first state to mandate a financial responsibility law for drivers—all states but two eventually followed.
Written by Jason Tushinski
Reviewed by Kathleen Flear
From merchants insuring their goods in ancient times to a Founding Father having a bright idea, and to states catching up to a booming early 20th-century auto industry to today’s super-simple, app-enabled policy-buying experience, the history of car insurance is a roarin’ good time!
Before you dive into the history of
car insurance
, it’s a good idea to make sure you have a robust policy of your own to protect your car, yourself, and other drivers on the road.
Lucky for you, nowadays you won’t have to convince your insurer to sell you a policy for your gas-powered automobile as opposed to one for your horse & carriage (side note—if your insurer sells only horse & carriage policies, you should probably look for a new insurer).
So, quit horsing around and let
find you the best, most affordable insurance policy for you!
Buckle up—none of this “saddlin’ up” business around here—and get ready to power through the history of car insurance!

The ancient origins of (car) insurance

Historians say insurance, similar to how we know it, emerged in Ancient Babylonia—merchants with loans would pay their lenders an extra amount to guard against liabilities in case their cargo was lost or destroyed during shipping.
This novel idea of merchants insuring their goods from peril endured through time to where we are today. We insure our cars to protect ourselves from financial loss, and to protect others from any damage or injury we might inflict on them.

The origins of car insurance in America (before it was America)—1751

In 1751, Benjamin Franklin (perhaps you’ve heard of him?) founded the first modern-day insurance company in what was to become the United States. The Philadelphia Contributionship was the first company to offer fire insurance in the colonies.
The Contributionship’s members agreed that, in exchange for a small fee, the organization would pay out a sum of money to a member in case their property was damaged or destroyed in a fire, or sustained fire-related damages. The Contributionship sold 143 policies that first year. Franklin—who I’m sure we can all agree was kind of smart—knew he was onto something.
So what did he do? Franklin ran with it, and began recommending insurance to other colonists while imparting the wisdom of insuring their crops, their belongings, their modes of transport (horses aren’t cheap, you know) and, most importantly, their lives. 
Of course, cars weren’t around quite yet. But the skids were greased for the emergence of an industry built around the idea of protecting yourself and what you own, and protecting others too.
And Ben Franklin? After kick-starting this country’s insurance industry, you’d think a guy would relax and rest on his laurels. 
But no—Franklin was a Founding Father in creating the United States of America, not to mention establishing the University of Pennsylvania and serving as the first Postmaster General in the colonies from 1737 to 1753. So, what have you done lately?
Key Takeaway:  Founded in 1751, the Philadelphia Contributionship was the first insurer in what became the United States, insuring members’ property against fire damage.

With automobiles comes insurance (eventually)

Fast forward a century-and-a-bit and, by the 1890’s as industrialization swept the globe, automobiles started to become a unique—if not quite common—sight on American roads. Along with this new kind of traffic, accidents followed and, eventually, so did car insurance, in a similar form to what we know today.

America’s first car insurance policy (kinda)—1897

In 1897,
Travelers Insurance
sold the country’s first car insurance policy to one Gilbert L. Loomis in Dayton, Ohio—this was essentially the first
liability coverage policy
sold to protect a driver from financial loss stemming from an at-fault accident.
Of course, it wasn’t that cut-and-dried. In 1897, there weren’t too many of these gas-powered oddities on the road, and Loomis—an early automobile tinkerer and inventor—was running into difficulties with legal issues stemming from his own automobile accidents. 
He sought to cover himself in case (or when) he was involved in another one. Loomis had a hard time convincing Travelers to write him a policy for his new, horseless ride.
Travelers did end up writing Loomis a policy that covered him for any injuries or damages he might cause in his new, motorized contraption. This new, modified horse & carriage policy was a sliver or peace of mind for Loomis, in an era when there were exactly zero safety standards for automobiles, nor any kind of driver training. 

America’s first car insurance policy is sold (actually)—1898

In 1898, Travelers Insurance sold the first, formally-written car insurance policy to a Dr. Truman Martin of Buffalo, New York.
Clearly, Travelers learned from its experience with Gilbert Loomis a year prior and, reading the tea leaves, could tell that the gas-powered contraptions starting to clog the country’s roadways weren’t going anywhere. 
Travelers (and other insurers, no doubt) could tell that insuring these new automobiles was a business opportunity.
More and more drivers—like Dr. Martin—could also see that times were changing and they needed protection when using their automobiles. Let’s face it, getting around by horse and buggy was becoming passe, no offense to the horses, of course. 
Anyways, Dr. Martin’s liability coverage for his horse-free automobile was for a whopping $5000, and it cost him $12.25 to purchase his policy.

Multi-line car insurance policies are introduced—1902

As more drivers began purchasing liability policies to cover them financially in case they caused an accident, in 1902 insurers began offering policies to cover drivers for damage and injury to their own vehicles as well.
Within a decade, insurers began bundling liability coverage with fire and theft coverage and offering them to drivers. 
This bundling was a precursor to what drivers can purchase today, including
collision insurance
, which protects a driver’s own vehicle from damage sustained in an accident with another vehicle or a fixed object, and
comprehensive insurance
, covering a driver for damage caused to their automobile from extreme weather, theft, vandalism, and other damages not caused by an accident with another vehicle.

Henry Ford’s Model T and its role in car insurance history

The Ford Motor Company and its mass-produced Model T played a huge part in increasing the number of cars on the road, not to mention the rising number of accidents, and the growing need for drivers to be insured.

Henry Ford and the Model T—1903-1913

In 1903, Henry Ford founded the Ford Motor Company in Highland Park, Michigan. While the eventually-successful Model T rolled off the line in 1908, it was Ford’s installment of a conveyor belt in 1913, allowing cars to be mass produced, that truly changed the game for cars—and car insurance—in the United States.
With a Model T rolling off the line every 90 minutes, they (and automobiles in general) were becoming legion, cheap, and accessible to the public. If Americans didn’t really need car insurance up to this point, they were sure going to need it now.

Car insurance becomes the law of the land (slowly)—1920s

As Model T’s multiplied, there were millions of cars on American roads by the 1920s. With all those cars, accidents followed—and with no guarantee that at-fault drivers could pay for the damage and injury (or deaths) they caused, it was clear that car insurance had a greater role to play in U.S. society.

Connecticut implements financial responsibility—1925

Sensing the government had a role to play, Connecticut stepped up to the proverbial plate and, in 1925, became the first U.S. first state to implement a financial responsibility law—this meant that drivers had to prove they could pay for any damages or injuries they might cause
To satisfy this law, many Connecticut drivers—but certainly not all—bought liability insurance.
There was a catch to Connecticut’s financial responsibility law—it only required drivers to prove financial responsibility after their first accident. Needless to say, this was a Model T-sized loophole and...a bit of a problem.

Massachusetts goes a step further—1927

Figuring they could do better, the Massachusetts state legislature passed—in between hefty portions of clam chowder, we’re certain—a law requiring drivers to prove financial responsibility before they were allowed to register their vehicles in the state.
The Bay State set the bar for requiring drivers to purchase car insurance before they could legally drive their vehicle. Other states would follow...eventually.

New York State joins the party

It only took a hair under 30 years, but New York became the second state to mandate drivers prove financial responsibility before registering their vehicle, doing so in 1956.
It was the Empire State that began the slow cascade of states mandating drivers to buy car insurance. As Government regulation came into vogue during the 1960s and 1970s, elected officials began following the path that Massachusetts set way back in 1927 of requiring drivers to be insured before registering a vehicle.
Today, every state—except the contrarians in Virginia and New Hampshire, where car insurance isn’t required—has minimum liability requirements that drivers must meet in order to hit the road.

Jerry transforms car insurance

Car insurance, as we know it, is still evolving. And the
app, and by extension its customers—have changed car insurance as we know it.
Founded in 2019, the Jerry app is a
licensed broker
that takes all the headaches and annoyances out of shopping for car insurance.
After signing up, Jerry uses your current policy information to deliver quotes from 50+ top providers straight to your smartphone. Once you make your pick, Jerry will take care of all the dirty work to switch you to your new policy and cancel your old one. We here at Jerry are pretty certain Ben Franklin would approve.
The best part? Jerry auto insurance saves its users an average of $879 a year! 
“I cannot express enough how amazing Jerry is. Everything was just so easy and smooth, and the whole process and experience was terrific. They took care of everything including canceling my current policy so I didn’t have to.” —Cass. L
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