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The History of Automotive Insurance

From Benjamin Franklin to Insurance Telematics

Although the first working car was presented in 1888 by Karl Benz, the widespread use of these new motorised vehicles did not gain a real foothold until after World War One and was still mainly relegated to large cities. Indeed, cities such as New York and London already had driving regulations in place for cattle, horses and carriages that even included speed limits and bans on drinking and driving, but it would take another half a century before public road safety began to be seriously addressed.

Today, insurance is an integral part of household economics and major financial decisions, alike. It provides financial protection for people who own a vehicle, a home or a business, but, although it was invented long ago, it only gained prominence in the twentieth century and, in some countries, in the late twentieth century.

The first insurance policy scheme was developed by Benjamin Franklin when, in 1751, he created the “Philadelphia Contributionship” to provide free fire insurance to colonists in the British colonies that were to become the United States, but it was only 150 years later, in 1897, that Gilbert J. Loomis became the first individual holder of an automotive liability insurance policy. The policy, which was issued in Dayton, Ohio (USA), protected Mr Loomis from property damage and manslaughter.

Nonetheless, aside from a handful of pioneers, motor vehicle insurance was rarely purchased before it was made compulsory and road accident victims seldom received any form of compensation for damage to their cars, lives and properties.

In Europe, the Scandinavian countries were at the forefront in addressing this issue. The first compulsory car insurance scheme was introduced by Denmark in 1918 and was followed by Norway in 1926 and Sweden in 1929. In the United Kingdom, the Road Traffic Act introduced mandatory insurance in 1930, while in Germany a similar obligation was set in 1939. Abroad, the United States had introduced mandatory vehicle insurance in 1925. As recently as 1959, most Mediterranean countries in Europe, along with Holland, did not have full compulsory vehicle insurance regulations.

Curiously, 1959 was the very year that the United States military establishment conducted its first tests with GPS systems, the geo-localisation system that was opened to civilian use in 2000 and, along with the Internet, led to the development of the first navigation and telematics services.

Octo Telematics, the first company to provide ad hoc telematics solutions for the insurance and automotive market, including a pioneering satellite-based vehicle anti-theft system, was founded on April 16, 2002.

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