The Beginning of Automobile Insurance

The start of automobile insurance began essentially with the innovation of the automobile in the early 1900s. Young entrepreneurs saw opportunity to get into a business and achieve the American Dream. The vision for offering automobile insurance has helped our country be a success as it is today. When did it all get started?

In the early 1900s, insurance companies were restricted to only one line of insurance. For instance, one company would sell fire insurance and another company would sell casualty insurance. Insurance companies were structured in this manner by the government until after World War II. While unbelievable amounts of changes were introduced in this time period, insurance companies were also changing for the better. Insurance companies were grouped into two: property- casualty insurers and life-health insurers. Automobile insurance became written under property-casualty insurers.

Not much history is recorded about automobile insurance; however, as the American culture developed and included cars, we can see the beginning of automobile insurance taking place. Owning an automobile or certain type of automobile became a sign of social status. As the car industry grew, the government placed more and more money into the building of roadways and improving traffic control. As this all took place in the 1920s, the American population started to see a rise in traffic regulations and strict vehicle licensing requirements. More and more accidents occurred on roadways and vehicle-related fatalities rose drastically. Roadway conditions were wretched and were deemed impossible to traverse through certain weather types. Thus in the 1940s states imposed a regulation that drivers were to cover the liability they had incurred while driving their vehicles. Automobile insurance easily satisfied this law. As more cars became available and the roads were better policed, insurance carriers saw a decrease in the risk of owning an automobile. Combined with a large economic boom after World War II, automobile insurance took off in a business boom. Although insurance is the most heavily regulated industry in the country, the government helped obtain great strides in the automobile insurance market. Soon the industry was branching into several lines including: fire, theft, property damage, and all sorts of liability coverage.

Whole families began to mobilize with the start of the Motor Age. Costs were relatively small to move large families at the same time. Although the vehicle could move a large family, an individual would be able to maintenance the vehicle easily. All the businesses worked together to bring families on to the road. Gas companies, automobile insurance, parking lots, vehicle servicing businesses all worked together to grow their business and bring America on to the roads. In addition to bringing America to the roads, more businesses popped up that tailored to the mobilized American thus creating a vicious cycle.

As more Americans could afford to own cars, more people took to the road. In the 1930s, newspapers reported that around 600,000 Americans had been seriously injured by automobiles and accidents. The reported economic losses accrued to around $600 million. Automobile insurance became a necessity. Americans could not afford to pay out of pocket for frequent accidents and other liabilities. The automobile insurance industry has grown, become mandatory in some states, and has seen great gains as well as losses. Without automobile insurance today, America would be in a much worse condition than ever before. People would resort public transportation and abandon owning a car. America would see less travel and yet another spurt of urbanization. Overall, things would be different. The economic wealth of our nation would plunge further and never be recovered as individuals and the government collapsed in high rates and taxes and litigations.

Where would America be without the motorized vehicle? We dread to imagine it. In addition, where would America be if some young entrepreneurs had not caught the vision and introduced automobile insurance to the United States of America? Many would be broke and bankrupt from paying out of pocket for huge liabilities. Courts would be crowded with litigations. Without automobile insurance, the automobile industry would be suffering more than it is today, if that is possible. Having automobile insurance is a good foresight to provide in the future and “just in case.”

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