Who Invented Car Insurance?

Some people have often wondered how car insurance came about. Did we really need car insurance? Exactly when did people have to start carrying car insurance? Who invented car insurance? Despite what we might like to think, there was not one person or one company who suddenly had the brainstorm to make money by insuring people’s cars. Basically, car insurance came about from the need to protect drivers and pedestrians because of the increasing usage of the new invention known as the automobile. You might say that car insurance naturally evolved. But if you want to know who invented car insurance, there are some other questions you need to answer first.

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Who Invented The Car?

You can’t look at who invented car insurance and why without first knowing who invented the car. Why is it important? Because of the timeline. The automobile did not come into wide usage until the early 1900’s and it was soon afterwards that car insurance followed. Car insurance might not have come into being unless there was an abundance of automobiles trafficking down the roads and city streets. After all, if there were not that many cars on the road, why insure them?

The inventor credited with the first vehicle powered by an internal combustion engine was a German inventor named Karl Benz (who later went on to form Mercedes-Benz). In 1893, Frank and Charles Duryea became the first American manufacturers of the automobile. However, it was not until 1913 when Henry Ford set up an assembly plant to effectively mass produce the automobile that the vehicle came to be widely available to the consumer. The automobile was now affordable, anyone could afford one, and the way that roads operated were suddenly and drastically changed.

How Did Car Insurance Get Started?


At the beginning of the automobile usage, there were no regulations or laws to dictate how drivers operated on the road. There were, however, private agreements between drivers and companies that would cover any claims to a motor vehicle. Once it was deemed that owning and driving a vehicle was a ‘privilege’ then laws were enacted to protect pedestrians, animals, and other property from damages caused by a vehicle. These private companies were some of the first insurance companies.

Car insurance polices actually evolved from maritime insurance hundreds of years earlier. The policies were to cover any losses and damages that might occur to property that was transported by ship. When the automobile was invented, these marine policies acted as a blueprint for car insurance. The first car insurance policy offered only liability coverage to protect any property that might be damaged by a motor vehicle. This first policy was written by an English insurance company back in 1895. In the U.S., the first liability car insurance policy was not written until 1898 and the first policy holder was a Dr. Truman J. Martin. It wasn’t until 1927 that Massachusetts became the first state in the U.S. to pass the first mandatory insurance law.

Once cars were in mass production and Henry Ford’s methods were used in plants all across the world, the car became the most popular method of travel. This led to the need for more laws to govern how drivers could behave on the road. The United Kingdom was one of the first countries to instigate these new laws. In 1930, they created the Road Traffic Act which included provisions for third party insurers.

Early Car Insurance Policies

When the first insurance laws were finally enacted they legally bound all motor vehicle owners to obtain auto insurance. With the growing popularity of the automobile, this gave birth to a thriving auto insurance business that literally came into being overnight. Some of those first companies offered policies that were quite expensive. However, as more companies entered the industry, it created more competition which lowered premiums. The addition of more insurance companies also allowed for different types of policies which covered different conditions. It was not long before car insurance became affordable for everyone.
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