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Sunday, August 17, 2008

The history of car insurance in the United States.

Auto insurance policies assume the risk of financial loss in the event of a car accident, which caused bodily harm, and damage of property of those involved. In the United States, almost all states require car insurance for all drivers. But how did this come to be?

The first auto insurance in the US was released in 1897 in response to the increasing production of vehicles. By the 1920s almost all car owners already had their cars insured and problems regarding the cost of insurance were already starting to show.
In 1968, a great debate regarding the high cost of insurance took place. During this time, there were many automobile lawsuits and reports say that there were certain racial and ages were denied of coverage at the standard rates. The US Congress released $1.6 million to the US Department of Transportation so that these claims could be investigated. In October of this year, the American Insurance Association called for the creation of a no-fault insurance policy wherein the insurance company would pay all the expenses regardless of who was at fault.

By 1968, the problem in the insurance industry is again in the field of auto insurance. Car insurance companies were outraged after the rejection of the 21% increase in insurance rates in New Jersey. As some insurance companies were accused of denying coverage to several motorists, several states were already considering the adoption of the no-fault system in replacement of the current tort system. The tort system, unlike the no-fault system, required that someone needs to be found at fault before a claim was paid.
It was in 1976 when a record of 24 states adopted the no-fault auto insurance. Unfortunately, the US Congress has not created a bill that would make this kind of insurance mandatory to all states. The Government Employees Insurance Company, the sixth largest car insurer in the US during this year showed financial issues as a result of capital losses incurred in 1975 and the earlier half of 1976. Fortunately, the downward trend in the US insurance industry finally caught up in 1977 and the world̢۪s largest car insurer, State Farm Insurance, announced that its earnings had now reached $129 million. According to researchers, this can be attributed to the decrease in the number of insurance claims filed. This trend was also observed with other smaller companies.

In 1980, there was a reported increase in traffic deaths as a result of the increasing popularity of small cars. During this time, 87% of claims were from small cars and there were claims that roads were made for trucks and larger vehicles. It was also recorded that over a million cars were stolen annually and automobile thieves now work for a chop shop where the cars are dismantled and the parts are sold.
At present, insurance rates are still rising and this is attributed to increased inflation. Thankfully, the no-fault insurance system is already in place and there are several states which provide government sponsored insurance.

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