From boats to blockchain: The history of insurance in the United States

A journey through coverages from the 17th century to today

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Susan Meyer

Senior Editorial Manager

  • Licensed Insurance Agent — Property and Casualty

Susan is a licensed insurance agent and has worked as a writer and editor for over 10 years across a number of industries. She has worked at The Zebr…

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Ross Martin

Insurance Writer

  • 4+ years in the Insurance Industry

Ross joined The Zebra as a writer and researcher in 2019. He specializes in writing insurance content to help shoppers make informed decisions.

Ross h…

The story of insurance

Insurance is something we ideally don’t have to think about. Whether it’s car insurance, home insurance or life insurance, we pay for it to have a financial safety net when something bad happens, but then hope we won’t have to use it. We may take for granted that it is accessible to us…until it’s suddenly harder to get

Today, insurance is a complex industry, regulated by state governments. But how did this all come to be? Insurance has a rich and diverse history in the United States. The development of the insurance industry in the U.S. is closely tied to the nation's economic growth, social changes and responses to various risks. 

This article explores the fascinating journey of insurance in the United States, from its humble beginnings to the multi-trillion-dollar industry we know today.

17th and 18th Century: Protecting ships and colonies

The concept of insurance can be traced back to ancient civilizations, but the formalization of insurance in the United States began in the late 17th century, before the United States was even a country. 

In the American colonies, maritime trade flourished, leading to the emergence of insurance practices related to shipping and cargo. It makes sense that merchants and cargo ships would be some of the earliest customers for insurance. After all, these ships and their crews were very expensive to fund, and the ocean could be an unpredictable and unforgiving place. Having a contingency in place for the investment was invaluable. Lloyd's Coffee House, a renowned gathering place for merchants and shipowners in London, played a crucial role in shaping marine insurance, a precursor to modern-day property insurance[1]

The 18th century saw the establishment of the first insurance companies in America — The Friendly Society, founded in 1735 in Charleston, South Carolina. This mutual insurance company went out of business just five years later. A few years later in 1752, The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. It focused on providing fire insurance to its members. It is the oldest continually running insurance carrier. This marked the beginning of organized, communal efforts to manage and distribute risks among a group of people[2].

19th Century: Industry brings expansion

The 19th century witnessed a significant expansion of the insurance industry in the United States. The Industrial Revolution transformed the economic landscape, leading to increased urbanization and industrialization. As businesses grew, so did the need for more sophisticated insurance products. After all, new wealth and new assets bring new things to protect.

The Civil War and its aftermath prompted the emergence of insurance policies covering a broader range of risks, including accident and disability coverage. Additionally, the growth of the railroad industry led to the development of liability insurance to address new challenges related to transportation and commerce.

With more companies and more insurance products available, this century also saw the earliest regulation of the industry. In 1851, New Hampshire created the first formal agency for regulating insurance and in 1866 the first attempts at rate standardization were started in New York. 

At the end of the 19th century, cars were just coming into the picture. In 1898, Travelers insured the first automobile insurance policy in the United States.

The first cars mean the first accidents

The first gas-driven cars were road-tested in 1893, and the sale of cars in the United States really took off at the turn of the century. Naturally, these early automobiles lacked the safety features and technology of our modern vehicles. In 1899, the first pedestrian was killed by a car in New York City. It wasn't until 1925 that Massachusetts became the first state to make auto insurance compulsory.

20th Century: Regulatory framework and modernization

The 20th century brought both challenges and opportunities for the insurance industry. The Great Depression highlighted the need for increased regulation and consumer protection. The McCarran-Ferguson Act of 1945 granted states the authority to regulate insurance, establishing a framework that persists to this day[3].

Post-World War II, the United States experienced an economic boom, and the insurance industry continued to evolve. The introduction of health insurance gained prominence, responding to the growing importance of healthcare in American society. Social Security provided a safety net for retirees, but private insurers played a crucial role in offering additional coverage and benefits.

The latter half of the century witnessed the rise of multinational insurance corporations and the expansion of insurance into diverse areas. The first package insurance policies for homeowners were introduced in 1950. The industry embraced technology, with the introduction of computers and later the internet, streamlining processes and enhancing customer service.

21st Century: Technological revolution and globalization

The 21st century has seen the insurance industry undergo a profound transformation due to technological advancements. Insurtech, a term combining "insurance" and "technology," emerged, bringing innovations such as artificial intelligence, telematics, big data analytics and blockchain to the forefront. These technologies have improved risk assessment, streamlined claims processing and enhanced customer experiences.

The globalization of financial markets has also impacted the insurance industry, leading to increased competition and the formation of strategic alliances between insurers worldwide. 

Climate change and the recognition of environmental risks have prompted the development of new insurance products to address emerging challenges.

Continuing into the future

The history of insurance in the United States is a story of adaptation and resilience. From its early beginnings in maritime trade to the complex, interconnected industry we see today, insurance has played a vital role in shaping the economic landscape of the nation. 

As the industry continues to evolve, it will undoubtedly face new challenges and opportunities, but its fundamental purpose — to provide financial protection against uncertainties—remains unchanged.