Auto Insurance History Of Personal Auto Insurance Policies

It was 1898 when the first car insurance policy was issued by the Travelers insurance. The policy was sold to a doctor in Buffalo, New York for $11.25. It was basically issued as a variation  variation of the “team” policies that covered horse-drawn carriages and the horses. The limit of insurance was set at $5,000. During those times, there were some 100 cars on the streets of the USA. Carriages dominated the roads during the late 19th century. The same trends continued in the early part of the 20th century. 

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Initially the product was first called “auto insurance". The main factor detrmining the rate was the vehicle’s horsepower. More underwriting factors start to come in the picture later in shapping the price of the auto insurance policy, factors such as auto type and weight, size, drivers, and geographical location.

Different insurers came in the picture and with that came also different variation of the auto policy. Confusions resulted as to the definitions of insured persons and insured vehicles. For that reason, state legislatures started to demand from insurers to standardize the auto insurance in the 1930s. 

The e first standardized personal auto policy went in to effect in 1936. Then the “family automobile policy” was introduced in 1956 where broader coverage needs of individuals and families was offered. This new auto insurance contract was built to offer liability protection, comprehensive and collision coverage, and rental coverage. The new policy was still misinterpretted by many people for vagueness.

The Insurance Services Office, or the ISO, and consequently, introduced a simple to understand personal auto policy or the PAP in 1977. Insurers do not have to use it although its becoming the standard for most insurers. Even insurers that do not use the ISO form they still use it as a model for their own auto insurance form.


posted on Wednesday, April 5, 2017