The Rearview Mirror: Hate Car Insurance? Blame Ben Franklin

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We all hate the cost of car insurance, even if we do need it from time to time.

Don’t look now, but the cost of car insurance is about to go up. For 2022, look for the average annual cost of car insurance to increase 5% to $1,707, up from $1,663 in 2021, according to Insurify. Similarly, S&P Global Market Intelligence states a handful of companies are increasing rates anywhere from 3% to nearly 12 percent.

No one likes paying for car insurance, but it’s required by law and is a major cost that comes in addition to your monthly car payment and any maintenance costs. Yet the origins of automotive insurance are nearly as old as the country itself.

Thanks a lot Ben Franklin

The Pennsylvania Gazette, published by Benjamin Franklin, who created America’s first insurance company.

Automobile insurance was created not long after the first cars chugged down the unpaved streets of America. But it started as a consequence of fire insurance, an industry started stateside by Benjamin Franklin and the company he founded, The Philadelphia Contributionship.

In the 18th Century, nothing scared city dwellers more than the threat of fire. Philadelphia never had an inferno on the scale of the 1666 Great Fire of Londonor Charleston’s 1740 fire, but the threat remained real. Franklin and his newspaper, The Pennsylvania Gazetteurged for the creation of fire brigades, the first of which was formed in 1736. More, as would fire insurance.

In 1752, Franklin, business leaders and area fire brigades met to form The Philadelphia Contributionship to insure homeowners against fire. Insured buildings had a metal marker on them, and the insurance plaques can still be seen atop many colonial-era homes in Philadelphia.

Newfangled cars beget newfangled insurance

Not long after the appearance of the 1893 Duryea, car insurance was created, but it was not mandatory. (Photo Credit: RM Sothebys)

The concept of insurance became a fixture of American life, and given that America’s earliest automobiles, including the Duryea and the Pope-Hartford, originated from New England, it’s only natural that auto insurance would as well.

The first policy was the creation of Travelers Insurance Co., founded in 1864 in Hartford, Connecticut. Travelers was already writing a variety of insurance policies at the end of the 19th century including liability coverage for the horse and carriage.

But the company soon adds a new line of business. Gilbert L. Loomis, owner of the Loomis Automobile Co. of Westfield, Massachusetts, is developing a steam-powered car in 1897. At the time, automobiles are new and novel, but so is their technology.

Accidents are inevitable, as are the legal troubles that accompany them. Inundated with legal issues, and looking for financial relief, Loomis asks Travelers Insurance to write a policy in the event that he hurts someone or something. The company did, but it’s written as a horse and carriage policy — the idea of ​​a car insurance policy is still novel.

The automobile insurance industry’s revenue is expected to reach $316.2 billion this year, and has grown 2.3% annually since 2017.

But Loomis has established a precedent, and one year later, in February 1898, Travelers issues the first true car insurance policy to Dr. Truman Martin of Buffalo, NY

Martin is a physician in the era when house calls are still common. He uses his car to visit his patients and worries about his potential liability should there be an accident. The policy costs $12.25 and gives Martin $5,000 in coverage in case his car collides with horse. The odds are good that he would. There are fewer than 4,000 cars in the US at the time, but there are 18 million horses.

What happens next

Loomis never produces his steam-powered car. By 1900, he had developed the Loomis Model No. 1, a 2-cylinder, two-passenger runabout that didn’t successful prove. If not for his insurance policy, Loomis would be forgotten entirely.

Other types of car insurance policies followed, including those for fire and theft, multiline car policies and those providing collision and comprehensive coverage, it soon became law for drivers to have it.

It started in 1925 as the state of Connecticut became the first state to require that car owners pay for any injuries or property damage resulting from a car accident. But the law only requires drivers prove their financial after their first accident. In contrast, the state of Massachusetts went farther, requiring drivers prove their financial responsibility as a requirement for their car registration. This compulsory insurance law is something we now live with, as all states require it.

As for The Philadelphia Contributionship, it still existsand is the oldest fire insurance company in America.

So if you hate paying for insurance, just throw a raspberry at founding father Ben. It’s all his fault.

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