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Car Insurance

The History Of Car Insurance

Even though the first car to ever be used by human kind can be traced back to the 1800s, mass usage of cars did not begin until the 20th century. It can be safely said that car insurance is an off shoot of marine insurance, which was the first type of insurance to ever be written. This was back in the early 1800s when Chinese sailors investors, took up insurance in order to protect their goods from pirates and ship wrecks caused by storms.

Even though the first car insurance issued by an English company was written in 1895, car insurance did not become popular until after the First World War, in the 1920s. Before the war, the number of cars on the roads was limited to the rich only. Subsequently, few people had the technical knowhow needed to manipulate cars. When the war began, it was evident that vehicles would be used to facilitate the war. More and more people were therefore trained in motor skills to handle vehicles used during the war.

After the war, still a few people owned cars due to the high purchase cost. When hire purchase was introduced in the 1920s, the situation changed and more people could now take up credit to buy cars. With time, accidents began to increase. This was mainly because of limited driving skills and absence of road regulation. There were no traffic police and worse, no traffic rules to govern drivers. Every driver was king on the road. Car insurance was available from a number of companies but only a few motorists bothered to purchase it; perhaps because no one quite understood the implications of driving an uninsured car. Furthermore, the government had not made it mandatory so few people were willing to ‘waste’ their money on insurance.

The increasing number of injuries and deaths prompted the establishment of a Road Traffic Act. Under the new Act of 1930, every car owner had to take up insurance to protect themselves and third parties while their vehicle was on the road. It was also a reprieve for drivers who could not afford to replace their car after road wreckage.

The number of players in the industry back then was limited to composite providers, who were also few in number. There was no specialization and the company from where you bought life insurance was also where you would purchase car insurance. The few companies in operation enjoyed monopoly.

As interest for car insurance grew, these composite providers got together and came up with proposed terms and conditions, and standard rates that were to be used across all companies. This was done to curb unhealthy competition and ensure that insurance companies operated on the same level. Prices and discounts were the same across all providers so it did not matter where you bought your insurance. In later years, they formed a Tariff, which had strict adherence rules which not everyone agreed to.

Those that did not join the Tariff group continued to offer services individually, even dropping rates lower than the Tariff members. This progress was cut short by the advent of the Second World War, and when the war ended in 1945, the insurance industry was back to where it had started. But thanks to the experience both motorists and insurance companies had previously, a boom hit in the 1960s.

Business was unstoppable especially when brokers came into the scene. They continued to enjoy brisk success until the early 80s, when the internet was discovered. This gave business operation a new face and suddenly insurance companies mushroomed everywhere, offering services online. To date, the Internet is the first stop for any motorist who wants cheap insurance rates. The impact this has is huge and has sparked fierce competition among insurers. It is a trend that is expected to go on for as long as the internet remains the most powerful trade weapon.


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