From a one-cylinder car to the compulsory policy: how did motor insurance come about?

If a horse and cart knocked down a pedestrian, one could take the guilty owner to court. But at the end of the 19th century a faster, heavier "self-propelled carriage", which few people could yet drive, came out onto the streets. The damage grew, while the guilty party's pocket was not always deep enough. Motor insurance was born to fill this gap.

Key points

The Travelers policy, 1897. The American insurance company Travelers records in its history that it issued an automobile insurance policy in 1897. According to the company's official 2007 statement, this policy covered a one-cylinder car built by a mechanic himself in Westfield, Massachusetts, and the company regards it as the first automobile policy in the country. (Some sources also name a different date and owner for the "first policy", so this claim is given as the company's own information.)
From voluntary to compulsory. At first buying a policy was up to the driver. As cars multiplied, the risk that a person hit by an uninsured driver would be left without compensation became a serious social problem.
Massachusetts, 1925–1927. According to materials of the Casualty Actuarial Society, the Massachusetts compulsory automobile liability insurance law was signed on 1 May 1925 and began to apply from 1 January 1927, with the registration of vehicles for 1927.
Britain, 1930. According to the House of Commons Library, in Britain insurance has been compulsory for drivers since the Road Traffic Act 1930, and the requirement is now set out in the 1988 Act. A 2006 House of Lords judgment says that the 1930 and 1934 Acts made third-party liability insurance compulsory and made it easier for the victim to recover compensation from the insurer.
There were gaps, too. The early compulsory regime did not cover every victim: passengers in the car remained outside compulsory cover. According to the Hansard record, in 1971 Parliament debated a bill to bring passengers into compulsory insurance as well.
The uninsured driver problem. Even when the law is compulsory, some people break it. According to the House of Commons Library, the Motor Insurers' Bureau was set up in Britain in 1946: it pays compensation to those harmed by an uninsured or untraced driver and is funded by contributions from insurance companies.
Two kinds of protection. Over time motor insurance split into two strands: liability insurance for damage caused to others (compulsory in many countries) and voluntary insurance for your own car (called KASKO in our country).

Then and now

Aspect	1897–1930	Today
Is a policy compulsory	Voluntary	Third-party liability is compulsory in many countries
Who is covered	As the driver chose	The scope set by law, plus a separate voluntary policy for one's own car
How a policy is issued	A paper contract, through an agent	Often online, an electronic policy
Damage by an uninsured driver	The victim could be left without compensation	In some countries a special fund or bureau covers it

Example

Sardor hit Malika's car from behind while it was stopped at a traffic light; repairing Malika's car costs 9 000 000 soum and repairing Sardor's own car costs 6 000 000 soum (compiled by the author, hypothetical figures; policy limits and terms are taken only for illustration, not from real tariffs).

Situation	Who covers Malika's damage	Who covers Sardor's own damage
Sardor has only a liability policy	Sardor's insurer (within the policy limit)	Sardor himself
Sardor has a liability policy and KASKO	Sardor's liability insurer	The KASKO insurer (on the terms of the contract)
Sardor has no policy at all	Sardor himself; recovery through the courts may be needed	Sardor himself

The third row shows the problem of the 1920s precisely: to get her 9 million soum, Malika depends on the ability of the guilty party to pay. Compulsory insurance laws were adopted precisely to reduce this risk.

Link with the previous and next periods: whereas fire insurance in London protected property and Bismarck's reforms protected the person, motor insurance established mass liability for "damage caused to others". Today these policies are issued via smartphone.