Brief history of auto insurance

In the first part of our historical review, we recalled how the first simple insurance systems worked and traced their development from the societies of Mesopotamia, Greece and Ancient Russia to more modern examples of insurance in Spain and England. Many of the principles that came into use in the XV-XVII centuries, are still used in modern insurance systems – of course, in a more developed and current form.

At the beginning of the 18th century, three main types of insurance existed and actively practiced: cattle mortality insurance, fire insurance and marine insurance. The technological revolution and the rapid development of production gave rise to other insurance systems: for example, personal insurance of life and health arose. The latter, however, because of the deep stratification in society, not many could benefit.

Social insurance, which arose at the turn of the XIX and XX centuries, was one of the answers to this lack of balance – it was designed to protect low-income citizens. In the 20th century, insurance began to diversify more and more: medical and social insurance, liability insurance and car insurance developed.

In continuation of the review we will tell the last type of insurance – auto insurance and how it appeared and developed.

First insurance claims

It is believed that the first car insurance policy was issued in 1897 in Dayton, Ohio. Gilbert Lumis bought a civil liability insurance policy for the Travelers Insurance Company (by the way, this company still exists) for one thousand dollars. The policy was defended by Lumis if he, having got into an emergency situation on a car, would harm the life or health of a third party or any property not owned by the driver. In modern money, the amount of coverage of Lumis was approximately 26 thousand dollars .

So, one of the most traditional forms of insurance for a modern person, of course, appeared quite recently – along with the spread of personal cars among the general population. Now OSAGO is one of the central areas of the insurance market.

In large cities, cars began to be actively used after the First World War. Since the technology was relatively new, the cars seemed fast (compared to other means of transportation that existed at the time), and driving was considered a dangerous occupation. At the same time, no insurance for the drivers themselves was assumed – he had to bear all the damages (damage to the car, property, and health) himself.

In addition, at the same time there were no driving tests – everyone who could buy a car had the right to drive it. There were no restrictions on the age and health of the driver. The roads and the rest of the infrastructure were also not designed for car rides – there were no measures protecting pedestrians from motorists, and there were no motorists from other dangers.

In 1930, in the United States alone, about 110 people died in car accidents every day 70 years later, in 2000, the population of the United States almost doubled, and “only” 114 people die in accidents. Given the significant increase in the number of cars, in 1930, one car killed 10 times more people than it does now.

By the way, the first driver’s license in history was received by Karl Benz, the legendary inventor of the first car in the world. He received them in 1888 in Germany and they had nothing to do with the assessment of his driving skills – they only gave him the right to drive a car on public roads. The restriction was introduced because the first cars were very noisy, and the locals were against too many cars driving through the busy city streets.


In 1925, Connecticut became the first state to adopt a law on financial responsibility. In essence, it meant that every car owner must prove that he has the financial capacity to compensate for the harm to life, health and property caused in the event of a possible accident. Despite the fact that it was possible to prove this in different ways, the simplest was to purchase a liability insurance policy – an early version of CTP. Interestingly, this law provided that the car owner is obliged to prove his financial viability only after the first accident.

In 1927, a similar law was passed in Massachusetts . He prescribed compulsory liability insurance for all car owners (regardless of whether they had previously been involved in an accident or not). Then, over the course of several years, the same laws were passed in the rest of the states.

Europe and Russia

In Europe, compulsory liability insurance has developed a bit differently.

The first legislative act regulating and making compulsory insurance on the road, was released in England in 1930 under the name “Road Act”. It adopted norms that have since been adopted (with minor changes) everywhere: for example, responsibility was introduced for careless driving or driving under the influence of alcohol or drugs, speed limits, and so on.

In addition, liability insurance standards were introduced: all drivers and car owners had to insure themselves from harm to life and health to third parties on the road. The road act in England was renewed in 1988, and now every car owner is obliged to issue insurance in accordance with its standards.

England was followed by the rest of the country – a similar law was passed in 1939 in Germany. 

Russia used the western models of insurance systems for most of the new history. But in the USSR, insurance has become part of the state monopoly. At the same time, despite the extensive insurance system, which was divided into compulsory and voluntary insurance and expanded over the years, auto insurance fell into the second category (voluntary insurance).

Since then, only a few decades have passed – during this time, auto insurance from several policies written by hand, has turned into a multi-million highly developed and partly even tech industry. How it works now, read in our magazine .

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