One need not be well versed in the history of auto insurance to guess that it did not arrive until after cars had been invented. The momentous event of the first ever auto insurance policy occurred as recently as 1897. However, the history of insurance traces back thousands of years.
Chinese merchants as far back as 3,000 B.C. were known to have practiced some form of coverage to limit individual loss should any merchandise vanish at sea. A little over a thousand years later, the Babylonians invented their own system to minimize the risk of shipping their goods. King Hammurabi authorized loans for merchants that would be paid back with interest if the cargo arrived intact.
In Greece, less than a thousand years later, the general average came into existence. Through this institution, a number of merchants would ship their goods together, each investing money into a collection that was later used to reimburse any whose goods were lost on the journey. An early form of life warranty appeared in Greece and Rome; societies were formed in which every member donated a weekly sum, and in the event of a member’s death, a portion of the collection would go to that person’s family for funeral expenses.
Widespread interest in insurance would later manifest primarily following disasters that served as reminders of its benefits. The first written warranty appeared in Genoa around the time of a tumultuous earthquake in the fourteenth century. This contract bore a close resemblance to those of the ancient days, involving a loan that would be overlooked if a ship were to sink. From this point on, insurance began to diverge farther and farther from ordinary investment, with premiums beginning to vary based more heavily on risk assessment. Specialized varieties began to appear throughout Europe. The Great Fire of London in 1666 claimed most of the homes of the city’s inhabitants, giving rise to property coverage.
America joined the insurance game in the middle of the eighteenth-century thanks to Benjamin Franklin. Members of the group he formed would assist each other financially should any member suffer losses as a result of fires. Franklin also suggested policies for crops and life insurance, while similar policies were being taken out across the ocean as well. Over the next century, programs began to appear to accommodate accidents, disease, and old age.
Then came the advent of automobiles. Following World War I, cars became more and more common in cities. The first auto insurance policy was taken out in 1897, six years after the first recorded car crash, but it wasn’t for some time after this that coverage would become compulsory. Since then, policies have become increasingly complex, and the roads have become safer due largely to the improvement of roads and the installment of implements like stop signs. Still, each year there are over five million accidents in the United States alone. Insurance seems to have been a good idea from the start, and today policies are in place to prevent disasters of all kinds from being worse than they have to be.