The History of Auto Insurance
Auto insurance is essentially a tort system, meaning that it is categorized under civil law and personal injury. A tort system means that one is harmed through negligence or deliberately. The whole concept of insurance, meaning paying money in the event of an accident or mishap for guaranteed protection, comes from Chinese merchants back in 3,000 B.C. who were tired of losing ships and cargo to ship wrecks, sinking and piracy.
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Ancient Chinese
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The idea of automobile insurance goes back to ancient Chinese times, millenia before cars had been thought of. The Chinese used to send cargo ships carrying provisions over the Atlantic Ocean. The people who owned the ships were almost always shareholders. Because of the conditions of that time, there were many ships that would get lost at sea. Shareholders began to take insurance plans to protect themselves against the loss of these ships and the cargo inside. This was called marine insurance. The distinguished Lloyd's of London used to be a gathering place for insurance underwriters in the late 1600s. "Lloyd's List" became the first certified directory of ships ever published. That list still serves as the backbone for marine insurance business as of today (2009). The British Parliament enacted the Marine Insurance Act in 1906, according to Random Acts, and the insurance wordings of today are heavily influenced by these original documents.
Original Automobile Insurance Policy
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The original automobile insurance policy was in print in 1895 by an English business. It was not until 1898 that Travelers Insurance Company of Hartford, Connecticut, wrote the first insurance policy in the United States, for Dr. Truman J. Martin. According to History.com, Martin paid $11.25 for a policy that covered $5,000 to $10,000 of liability.
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Massachusetts
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The first state to order mandatory automobile insurance was Massachusetts in 1927. Automobile insurance was and still is a by-product of marine insurance. Policymakers determined that operating a vehicle is a privilege and therefore determined that by law motorists must carry coverage to shield innocent third parties against damage or injury.
Growth
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In 1930, the United Kingdom passed the "Road Traffic Act." This basically made it required for motor vehicle owners to carry liability for injury or death to third parties. This was the first time that car insurance was mandatory in the U.K, and at the time there was no competition in this business sector. Auto insurance rates were non-negotiable and were the same for everyone. In return, all policies and coverage was also the same. To stop the growing monopoly, insurance brokers moved to the forefront, and insurance became a huge business. In the U.S., auto insurance took off after World War II, as a rapid increase in the automobile industry and the highway system led to the need for financial responsibility and mandatory insurance coverage laws for motorists.
Today
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As of 2009, all states within the United States require mandatory car insurance with a minimum of liability coverage that protects innocent losses. While each state requires some degree of car insurance, the states differ in their requirements. To find out what your state requires, it is best to refer to its Department of Motor Vehicles website. Insurance companies calculate car insurance payments by factoring in your age, the type of vehicle you drive, your driving record, credit history and sex.
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