Insurance , in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of a guaranteed small loss to prevent a large, possibly devastating loss. An insurer is a company selling the insurance. The insurance rate is a factor used to determine the amount, called the premium , to be charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

Commercially insurable risks typically share seven common characteristics.1

The technical definition of "indemnity" means to make whole again. There are two types of insurance contracts; 1) an "indemnity" policy and 2) a "pay on behalf" or "on behalf of"3 policy. The difference is significant on paper, but rarely material in practice.

An "indemnity" policy will never pay claims until the insured has paid out of pocket to some third party; for example, a visitor to your home slips on a floor that you left wet and sues you for $10,000 and wins. Under an "indemnity" policy the homeowner would have to come up with the $10,000 to pay for the visitor's fall and then would be "indemnified" by the insurance carrier for the out of pocket costs (the $10,000)4.

Under the same situation, a "pay on behalf" policy, the insurance carrier would pay the claim and the insured (the homeowner) would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf" language5.

An entity seeking to transfer risk (an inidual, corporation, or association of any type, etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, called an insurance 'policy'. Generally, an insurance contract includes, at a minimum, the following elements: the parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus said to be "indemnified" against the loss events covered in the policy.

When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a 'claim' against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the 'premium'. Insurance premiums from many insureds are used to fund accounts reserved for later payment of claims—in theory for a relatively few claimants—and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses (i.e., reserves), the remaining margin is an insurer's profit.

Profit = earned premium + investment income - incurred loss - underwriting expenses.

Insurers make money in two ways: (1) through underwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks and (2) by investing the premiums they collect from insured parties.

The most complicated aspect of the insurance business is the underwriting of Using a wide assortment of data, insurers predict the likelihood that a claim will be made against their policies and price products accordingly. To this end, insurers use actuarial science to quantify the risks they are willing to assume and the premium they will charge to assume them. Data is analyzed to fairly accurately project the rate of future claims based on a given risk. Actuarial science uses statistics and probability to analyze the risks associated with the range of perils covered, and these scientific principles are used to determine an insurer's overall exposure. Upon termination of a given policy, the amount of premium collected and the investment gains thereon minus the amount paid out in claims is the insurer's underwriting profit on that policy. Of course, from the insurer's perspective, some policies are winners (i.e., the insurer pays out less in claims and expenses than it receives in premiums and investment income) and some are losers (i.e., the insurer pays out more in claims and expenses than it receives in premiums and investment income).

An insurer's underwriting performance is measured in its combined ratio. The loss ratio (incurred losses and loss-adjustment expenses ided by net earned premium) is added to the expense ratio (underwriting expenses ided by net premium written) to determine the company's combined ratio. The combined ratio is a reflection of the company's overall underwriting profitability. A combined ratio of less than 100 percent indicates underwriting profitability, while anything over 100 indicates an underwriting loss.

Insurance companies also earn investment profits on “float”. “Float” or available reserve is the amount of money, at hand at any given moment, that an insurer has collected in insurance premiums but has not been paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest on them until claims are paid out.

In the United States, the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, as the result of float. Some insurance industry insiders, most notably Hank Greenberg, do not believe that it is forever possible to sustain a profit from float without an underwriting profit as well, but this opinion is not universally held. Naturally, the “float” method is difficult to carry out in an economically depressed period. Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards. So a poor economy generally means high insurance premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the "underwriting" or insurance cycle. 6

Property and casualty insurers currently make the most money from their auto insurance line of business. Generally better statistics are available on auto losses and underwriting on this line of business has benefited greatly from advances in computing. Additionally, property losses in the United States, due to natural catastrophes, have exacerbated this trend.

Finally, claims and loss handling is the materialized utility of insurance. In managing the claims-handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages. As part of this balancing act, fraudulent insurance practices are a major business risk that must be managed and overcome.

In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: money economies (with markets, money, financial instruments and so on) and non-money or natural economies (without money, markets, financial instruments and so on). The second type is a more ancient form than the first. In such an economy and community, we can see insurance in the form of people helping each other. For example, if a house burns down, the members of the community help build a new one. Should the same thing happen to one's neighbour, the other neighbours must help. Otherwise, neighbours will not receive help in the future. This type of insurance has survived to the present day in some countries where modern money economy with its financial instruments is not widespread (for example countries in the territory of the former Soviet Union).

Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practised by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practised by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen.

Achaemenian monarchs of Iran were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices.

The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: "[W]henever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much."[1]

A thousand years later, the inhabitants of Rhodes invented the concept of the 'general average'. Merchants whose goods were being shipped together would pay a proportionally ided premium which would be used to reimburse any merchant whose goods were jettisoned during storm or sinkage.

The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organized guilds called "benevolent societies" which cared for the families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies.

Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed.

Toward the end of the seventeenth century, London's growing importance as a centre for trade increased demand for marine insurance. In the late 1680s, Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships’ captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is not an insurance company) for marine and other specialist types of insurance, but it works rather differently than the more familiar kinds of insurance.

Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an office to insure buildings. In 1680, he established England's first fire insurance company, "The Fire Office," to insure brick and frame homes.

The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses. In the United States, regulation of the insurance industry is highly Balkanized, with primary responsibility assumed by inidual state insurance departments. Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate inidually, though at times in concert through a national insurance commissioners' organization. In recent years, some have called for a dual state and federal regulatory system (commonly referred to as the Optional Federal Charter (OFC)) for insurance similar to that which oversees state banks and national banks.

Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as "perils". An insurance policy will set out in detail which perils are covered by the policy and which are not. Below are (non-exhaustive) lists of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set out below. For example, auto insurance would typically cover both property risk (covering the risk of theft or damage to the car) and liability risk (covering legal claims from causing an accident). A homeowner's insurance policy in the U.S. typically includes property insurance covering damage to the home and the owner's belongings, liability insurance covering certain legal claims against the owner, and even a small amount of coverage for medical expenses of guests who are injured on the owner's property.

Business insurance can be any kind of insurance that protects businesses against risks. Some principal subtypes of business insurance are (a) the various kinds of , also called , which are discussed below under that name; and (b) the business owner's policy (BOP), which bundles into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners insurance bundles the coverages that a homeowner needs.7

Auto insurance protects you against financial loss if you have an accident. It is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy. Auto insurance provides property, liability and medical coverage: (1) Property coverage pays for damage to or theft of your car. (2) Liability coverage pays for your legal responsibility to others for bodily injury or property damage. and (3) Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses. An auto insurance policy is comprised of six different kinds of coverage. Most states require you to buy some, but not all, of these coverages. If you're financing a car, your lender may also have requirements.

Most auto policies are for six months to a year. Your insurance company should notify you by mail when it’s time to renew the policy and to pay your premium. 8

What is homeowners insurance?

Homeowners insurance provides financial protection against disasters. A standard policy insures the home itself and the things you keep in it.

Homeowners insurance is a package policy. This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.

Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance. You must buy two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowners' responsibility. 9

Health insurance policies by the National Health Service in the United Kingdom (NHS) or other publicly-funded health programs will cover the cost of medical treatments. Dental insurance, like medical insurance, is coverage for iniduals to protect them against dental costs. In the U.S., dental insurance is often part of an employer's benefits package, along with health insurance. Most countries rely on public funding to ensure that all citizens have universal access to health care.

• Disability insurance policies provide financial support in the event the policyholder is unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as mortgages and credit cards.
• Total permanent disability insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.
• Disability overhead insurance allows business owners to cover the overhead expenses of their business while they are unable to work.
• Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expenses incurred because of a job-related injury.

Casualty insurance insures against accidents, not necessarily tied to any specific property.

• Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.
• Political risk insurance is a form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss.

Life insurance provides a monetary benefit to a descedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity.

Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.

Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed.

In many countries, such as the U.S. and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death.

In U.S., the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation. A combination of low-cost term life insurance and a higher-return tax-efficient retirement account may achieve better investment return.

Property insurance provides protection against risks to property, such as fire, theft or weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance.

• Automobile insurance, known in the UK as , is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the insured's vehicle itself. Throughout the United States an auto insurance policy is required to legally operate a motor vehicle on public roads. In some jurisdictions, bodily injury compensation for automobile accident victims has been changed to a no-fault system, which reduces or eliminates the ability to sue for compensation but provides automatic eligibility for benefits. Credit card companies insure against damage on rented cars.
  • Driving School Insurance insurance provides cover for any authorized driver whilst undergoing tuition, cover also unlike other motor policies provides cover for instructor liability where both the pupil and driving instructor are equally liable in the event of a claim.
• Aviation insurance insures against hull, spares, deductibles, hull wear and liability risks.
• Boiler insurance (also known as boiler and machinery insurance or equipment breakdown insurance) insures against accidental physical damage to equipment or machinery.
• Builder's risk insurance insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage due to any cause (including the negligence of the insured) not otherwise expressly excluded.
• Crop insurance "Farmers use crop insurance to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease, for instance."10
• Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary homeowners insurance policies do not cover earthquake damage. Most earthquake insurance policies feature a high deductible. Rates depend on location and the probability of an earthquake, as well as the construction of the home.
• A fidelity bond is a form of casualty insurance that covers policyholders for losses that they incur as a result of fraudulent acts by specified iniduals. It usually insures a business for losses caused by the dishonest acts of its employees.
• Flood insurance protects against property loss due to flooding. Many insurers in the U.S. do not provide flood insurance in some portions of the country. In response to this, the federal government created the National Flood Insurance Program which serves as the insurer of last resort.
• Home insurance or homeowners' insurance: See "Property insurance".
• Landlord insurance is specifically designed for people who own properties which they rent out. Most house insurance cover in the U.K will not be valid if the property is rented out therefore landlords must take out this specialist form of home insurance.
• Marine insurance and marine cargo insurance cover the loss or damage of ships at sea or on inland waterways, and of the cargo that may be on them. When the owner of the cargo and the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier's insurance. Many marine insurance underwriters will include "time element" coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.
• Surety bond insurance is a three party insurance guaranteeing the performance of the principal.
• Terrorism insurance provides protection against any loss or damage caused by terrorist activities.
• Volcano insurance is an insurance that covers volcano damage in Hawaii.
• Windstorm insurance is an insurance covering the damage that can be caused by hurricanes and tropical cyclones.

Liability insurance is a very broad superset that covers legal claims against the insured. Many types of insurance include an aspect of liability coverage. For example, a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property; automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives, health, or property. The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and indemnification (payment on behalf of the insured) with respect to a settlement or court verdict. Liability policies typically cover only the negligence of the insured, and will not apply to results of wilful or intentional acts by the insured.

• Environmental liability insurance protects the insured from bodily injury, property damage and cleanup costs as a result of the dispersal, release or escape of pollutants.
• Errors and omissions insurance: See "Professional liability insurance" under "Liability insurance".
• Professional liability insurance, also called , protects insured professionals such as architectural corporation and medical practice against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession. For example, professional liability insurance in reference to the medical profession may be called Notaries public may take out Other potential E&O policyholders include, for example, real estate brokers, home inspectors, appraisers, and website developers.
• Directors and officers liability insurance protects an organization (usually a corporation) from costs associated with litigation resulting from mistakes made by directors and officers for which they are liable. In the industry, it is usually called "D&O" for short.
• Prize indemnity insurance protects the insured from giving away a large prize at a specific event. Examples would include offering prizes to contestants who can make a half-court shot at a basketball game, or a hole-in-one at a golf tournament.

Credit insurance repays some or all of a loan when certain things happen to the borrower such as unemployment, disability, or death.

• Mortgage insurance insures the lender against default by the borrower. Mortgage insurance is a form of credit insurance, although the name more often is used to refer to policies that cover other kinds of debt.

• Collateral protection insurance or CPI, insures property (primarily vehicles) held as collateral for loans made by lending institutions.
• Defense Base Act Workers' compensation or DBA Insurance provides coverage for civilian workers hired by the government to perform contracts outside the U.S. and Canada. DBA is required for all U.S. citizens, U.S. residents, U.S. Green Card holders, and all employees or subcontractors hired on overseas government contracts. Depending on the country, Foreign Nationals must also be covered under DBA. This coverage typically includes expenses related to medical treatment and loss of wages, as well as disability and death benefits.
• Expatriate insurance provides iniduals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.
• Financial loss insurance protects iniduals and companies against various financial risks. For example, a business might purchase coverage to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time. Insurance might also cover the failure of a creditor to pay money it owes to the insured. This type of insurance is frequently referred to as "business interruption insurance." Fidelity bonds and surety bonds are included in this category, although these products provide a benefit to a third party (the "obligee") in the event the insured party (usually referred to as the "obligor") fails to perform its obligations under a contract with the obligee.
• Kidnap and ransom insurance
• Locked funds insurance is a little-known hybrid insurance policy jointly issued by governments and banks. It is used to protect public funds from tamper by unauthorized parties. In special cases, a government may authorize its use in protecting semi-private funds which are liable to tamper. The terms of this type of insurance are usually very strict. Therefore it is used only in extreme cases where maximum security of funds is required.
• Nuclear incident insurance covers damages resulting from an incident involving radioactive materials and is generally arranged at the national level. See the Nuclear exclusion clause and for the United States the Price-Anderson Nuclear Industries Indemnity Act)
• Pet insurance insures pets against accidents and illnesses - some companies cover routine/wellness care and burial, as well.
• Pollution Insurance, which consists of first-party coverage for contamination of insured property either by external or on-site sources. Coverage for liability to third parties arising from contamination of air, water, or land due to the sudden and accidental release of hazardous materials from the insured site. The policy usually covers the costs of cleanup and may include coverage for releases from underground storage tanks. Intentional acts are specifically excluded.
• Purchase insurance is aimed at providing protection on the products people purchase. Purchase insurance can cover inidual purchase protection, warranties, guarantees, care plans and even mobile phone insurance. Such insurance is normally very limited in the scope of problems that are covered by the policy.
• Title insurance provides a guarantee that title to real property is vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records performed at the time of a real estate transaction.
• Travel insurance is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, loss of personal belongings, travel delay, personal liabilities, etc.

• Protected Self-Insurance is an alternative risk financing mechanism in which an organization retains the mathematically calculated cost of risk within the organization and transfers the catastrophic risk with specific and aggregate limits to an insurer so the maximum total cost of the program is known. A properly designed and underwritten Protected Self-Insurance Program reduces and stabilizes the cost of insurance and provides valuable risk management information.
• Retrospectively Rated Insurance is a method of establishing a premium on large commercial accounts. The final premium is based on the insured's actual loss experience during the policy term, sometimes subject to a minimum and maximum premium, with the final premium determined by a formula. Under this plan, the current year's premium is based partially (or wholly) on the current year's losses, although the premium adjustments may take months or years beyond the current year's expiration date. The rating formula is guaranteed in the insurance contract. Formula: retrospective premium = converted loss + basic premium × tax multiplier. Numerous variations of this formula have been developed and are in use.
• Fraternal insurance is provided on a cooperative basis by fraternal benefit societies or other social organizations.11
• Formal self insurance is the deliberate decision to pay for otherwise insurable losses out of one's own money. This can be done on a formal basis by establishing a separate fund into which funds are deposited on a periodic basis, or by simply forgoing the purchase of available insurance and paying out-of-pocket. Self insurance is usually used to pay for high-frequency, low-severity losses. Such losses, if covered by conventional insurance, mean having to pay a premium that includes loadings for the company's general expenses, cost of putting the policy on the books, acquisition expenses, premium taxes, and contingencies. While this is true for all insurance, for small, frequent losses the transaction costs may exceed the benefit of volatility reduction that insurance otherwise affords.
• No-fault insurance is a type of insurance policy (typically automobile insurance) where insureds are indemnified by their own insurer regardless of fault in the incident.
• Reinsurance is a type of insurance purchased by insurance companies or self-insured employers to protect against unexpected losses. Financial reinsurance is a form of reinsurance that is primarily used for capital management rather than to transfer insurance risk.
• Stop-loss insurance provides protection against catastrophic or unpredictable losses. It is purchased by organizations who do not want to assume 100% of the liability for losses arising from the plans. Under a stop-loss policy, the insurance company becomes liable for losses that exceed certain limits called deductibles.
• Social insurance can be many things to many people in many countries. But a summary of its essence is that it is a collection of insurance coverages (including components of life insurance, disability income insurance, unemployment insurance, health insurance, and others), plus retirement savings, that requires participation by all citizens. By forcing everyone in society to be a policyholder and pay premiums, it ensures that everyone can become a claimant when or if he/she needs to. Along the way this inevitably becomes related to other concepts such as the justice system and the welfare state. This is a large, complicated topic that engenders tremendous debate, which can be further studied in the following articles (and others):
  • Social welfare provision
  • Social security
  • Social safety net
  • National Insurance
  • Social Security (United States)
  • Social Security debate (United States)

Some communities prefer to create virtual insurance amongst themselves by other means than contractual risk transfer, which assigns explicit numerical values to risk. A number of religious groups, including the Amish and some Muslim groups, depend on support provided by their communities when disasters strike. The risk presented by any given person is assumed collectively by the community who all bear the cost of rebuilding lost property and supporting people whose needs are suddenly greater after a loss of some kind. In supportive communities where others can be trusted to follow community leaders, this tacit form of insurance can work. In this manner the community can even out the extreme differences in insurability that exist among its members. Some further justification is also provided by invoking the moral hazard of explicit insurance contracts.

In the United Kingdom, The Crown (which, for practical purposes, meant the Civil service) did not insure property such as government buildings. If a government building was damaged, the cost of repair would be met from public funds because, in the long run, this was cheaper than paying insurance premiums. Since many UK government buildings have been sold to property companies, and rented back, this arrangement is now less common and may have disappeared altogether.

Insurance companies may be classified into two groups:

• insurance companies, which sell life insurance, annuities and pensions products.
• , , or insurance companies, which sell other types of insurance.

General insurance companies can be further ided into these sub categories.

• Standard Lines
• Excess Lines

In most countries, life and non-life insurers are subject to different regulatory regimes and different tax and accounting rules. The main reason for the distinction between the two types of company is that life, annuity, and pension business is very long-term in nature — coverage for life assurance or a pension can cover risks over many decades. By contrast, non-life insurance cover usually covers a shorter period, such as one year.

In the United States, standard line insurance companies are "main stream" insurers. These are the companies that typically insure autos, homes or businesses. They use pattern or "cookie-cutter" policies without variation from one person to the next. They usually have lower premiums than excess lines and can sell directly to iniduals. They are regulated by state laws that can restrict the amount they can charge for insurance policies.

Excess line insurance companies (aka Excess and Surplus) typically insure risks not covered by the standard lines market. They are broadly referred as being all insurance placed with non-admitted insurers. Non-admitted insurers are not licensed in the states where the risks are located. These companies have more flexibility and can react faster than standard insurance companies because they are not required to file rates and forms as the "admitted" carriers do. However, they still have substantial regulatory requirements placed upon them. State laws generally require insurance placed with surplus line agents and brokers not to be available through standard licensed insurers.

Insurance companies are generally classified as either or companies. Mutual companies are owned by the policyholders, while stockholders (who may or may not own policies) own stock insurance companies. Demutualization of mutual insurers to form stock companies, as well as the formation of a hybrid known as a mutual holding company, became common in some countries, such as the United States, in the late 20th century. Other possible forms for an insurance company include , in which policyholders 'reciprocate' in sharing risks, and Lloyds organizations.

Insurance companies are rated by various agencies such as A. M. Best. The ratings include the company's financial strength, which measures its ability to pay claims. It also rates financial instruments issued by the insurance company, such as bonds, notes, and securitization products.

companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves. A reinsurer may also be a direct writer of insurance risks as well.

companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups. This definition can sometimes be extended to include some of the risks of the parent company's customers. In short, it is an in-house self-insurance vehicle. Captives may take the form of a "pure" entity (which is a 100% subsidiary of the self-insured parent company); of a "mutual" captive (which insures the collective risks of members of an industry); and of an "association" captive (which self-insures inidual risks of the members of a professional, commercial or industrial association). Captives represent commercial, economic and tax advantages to their sponsors because of the reductions in costs they help create and for the ease of insurance risk management and the flexibility for cash flows they generate. Additionally, they may provide coverage of risks which is neither available nor offered in the traditional insurance market at reasonable prices.

The types of risk that a captive can underwrite for their parents include property damage, public and product liability, professional indemnity, employee benefits, employers' liability, motor and medical aid expenses. The captive's exposure to such risks may be limited by the use of reinsurance.

Captives are becoming an increasingly important component of the risk management and risk financing strategy of their parent. This can be understood against the following background:

• heavy and increasing premium costs in almost every line of coverage;
• difficulties in insuring certain types of fortuitous risk;
• differential coverage standards in various parts of the world;
• rating structures which reflect market trends rather than inidual loss experience;
• insufficient credit for deductibles and/or loss control efforts.

There are also companies known as 'insurance consultants'. Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy amongst many companies. Similar to an insurance consultant, an 'insurance broker' also shops around for the best insurance policy amongst many companies. However, with insurance brokers, the fee is usually paid in the form of commission from the insurer that is selected rather than directly from the client.

Neither insurance consultants nor insurance brokers are insurance companies and no risks are transferred to them in insurance transactions. Third party administrators are companies that perform underwriting and sometimes claims handling services for insurance companies. These companies often have special expertise that the insurance companies do not have.

The financial stability and strength of an insurance company should be a major consideration when buying an insurance contract. An insurance premium paid currently provides coverage for losses that might arise many years in the future. For that reason, the viability of the insurance carrier is very important. In recent years, a number of insurance companies have become insolvent, leaving their policyholders with no coverage (or coverage only from a government-backed insurance pool or other arrangement with less attractive payouts for losses). A number of independent rating agencies, such as Best's, Fitch, Standard & Poor's, and Moody's Investors Service, provide information and rate the financial viability of insurance companies.

Global insurance premiums grew by 8.0% in 2006 (or 5% in real terms) to reach $3.7 trillion due to improved profitability and a benign economic environment characterised by solid economic growth, moderate inflation and strong equity markets. Profitability improved in both life and non-life insurance in 2006 compared to the previous year. Life insurance premiums grew by 10.2% in 2006 as demand for annuity and pension products rose. Non-life insurance premiums grew by 5.0% due to growth in premium rates. Over the past decade, global insurance premiums rose by more than a half as annual growth fluctuated between 2% and 11%.

Advanced economies account for the bulk of global insurance. With premium income of $1,485bn, Europe was the most important region, followed by North America ($1,258bn) and Asia ($801bn). The top four countries accounted for nearly two-thirds of premiums in 2006. The U.S. and Japan alone accounted for 43% of world insurance, much higher than their 7% share of the global population. Emerging markets accounted for over 85% of the world’s population but generated only around 10% of premiums. The volume of UK insurance business totalled $418bn in 2006 or 11.2% of global premiums. 12

By creating a "security blanket" for its insureds, an insurance company may inadvertently find that its insureds may not be as risk-averse as they might otherwise be (since, by definition, the insured has transferred the risk to the insurer). This problem is known to the insurance industry as moral hazard. To reduce their own financial exposure, insurance companies have contractual clauses that mitigate their obligation to provide coverage if the insured engages in behavior that grossly magnifies their risk of loss or liability.

For example, life insurance companies may require higher premiums or deny coverage altogether to people who work in hazardous occupations or engage in dangerous sports. Liability insurance providers do not provide coverage for liability arising from intentional torts committed by the insured. Even if a provider were so irrational as to want to provide such coverage, it is against the public policy of most countries to allow such insurance to exist, and thus it is usually illegal.

Insurance policies can be complex and some policyholders may not understand all the fees and coverages included in a policy. As a result, people may buy policies on unfavorable terms. In response to these issues, many countries have enacted detailed statutory and regulatory regimes governing every aspect of the insurance business, including minimum standards for policies and the ways in which they may be advertised and sold.

Many institutional insurance purchasers buy insurance through an insurance broker. Brokers represent the buyer (not the insurance company), and typically counsel the buyer on appropriate coverage and policy limitations. A broker generally holds contracts with many insurers, thereby allowing the broker to "shop" the market for the best rates and coverage possible.

Insurance may also be purchased through an agent. Unlike a broker, who represents the policyholder, an agent represents the insurance company from whom the policyholder buys. An agent can represent more than one company.

Redlining is the practice of denying insurance coverage in specific geographic areas, supposedly because of a high likelihood of loss, while the alleged motivation is unlawful discrimination. Racial profiling or redlining has a long history in the property insurance industry in the United States. From a review of industry underwriting and marketing materials, court documents, and research by government agencies, industry and community groups, and academics, it is clear that race has long affected and continues to affect the policies and practices of the insurance industry.13

All states have provisions in their rate regulation laws or in their fair trade practice acts that prohibit unfair discrimination, often called redlining, in setting rates and making insurance available.14

In determining premiums and premium rate structures, insurers consider quantifiable factors, including location, credit scores, gender, occupation, marital status, and education level. However, the use of such factors is often considered to be unfair or unlawfully discriminatory, and the reaction against this practice has in some instances led to political disputes about the ways in which insurers determine premiums and regulatory intervention to limit the factors used.

An insurance underwriter's job is to evaluate a given risk as to the likelihood that a loss will occur. Any factor that causes a greater likelihood of loss should theoretically be charged a higher rate. This basic principle of insurance must be followed if insurance companies are to remain solvent. Thus, "discrimination" against (i.e., negative differential treatment of) potential insureds in the risk evaluation and premium-setting process is a necessary by-product of the fundamentals of insurance underwriting. For instance, insurers charge older people significantly higher premiums than they charge younger people for term life insurance. Older people are thus treated differently than younger people (i.e., a distinction is made, discrimination occurs). The rationale for the differential treatment goes to the heart of the risk a life insurer takes: Old people are likely to die sooner than young people, so the risk of loss (the insured's death) is greater in any given period of time and therefore the risk premium must be higher to cover the greater risk. However, treating insureds differently when there is no actuarially sound reason for doing so is unlawful discrimination.

What is often missing from the debate is that prohibiting the use of legitimate, actuarially sound factors means that an insufficient amount is being charged for a given risk, and there is thus a deficit in the system. The failure to address the deficit may mean insolvency and hardship for all of a company's insureds. The options for addressing the deficit seem to be the following: Charge the deficit to the other policyholders or charge it to the government (i.e., externalize outside of the company to society at large).

New insurance products can now be protected from copying with a business method patent in the United States.

A recent example of a new insurance product that is patented is Usage Based auto insurance. Early versions were independently invented and patented by a major U.S. auto insurance company, Progressive Auto Insurance () and a Spanish independent inventor, Salvador Minguijon Perez (EP patent 0700009).

Many independent inventors are in favor of patenting new insurance products since it gives them protection from big companies when they bring their new insurance products to market. Independent inventors account for 70% of the new U.S. patent applications in this area. One such example is titled "Method of Expediting Insurance Claims" Patent 7,203,654 issued April 10, 2007.

Many insurance executives are opposed to patenting insurance products because it creates a new risk for them. The Hartford insurance company, for example, recently had to pay $80 million to an independent inventor, Bancorp Services, in order to settle a patent infringement and theft of trade secret lawsuit for a type of corporate owned life insurance product invented and patented by Bancorp.

There are currently about 150 new patent applications on insurance inventions filed per year in the United States. The rate at which patents have issued has steadily risen from 15 in 2002 to 44 in 2006. 15

Inventors can now have their insurance U.S. patent applications reviewed by the public in the Peer to Patent program.16

Certain insurance products and practices have been described as rent seeking by critics. That is, some insurance products or practices are useful primarily because of legal benefits, such as reducing taxes, as opposed to providing protection against risks of adverse events. Under United States tax law, for example, most owners of variable annuities and variable life insurance can invest their premium payments in the stock market and defer or eliminate paying any taxes on their investments until withdrawals are made. Sometimes this tax deferral is the only reason people use these products. Another example is the legal infrastructure which allows life insurance to be held in an irrevocable trust which is used to pay an estate tax while the proceeds themselves are immune from the estate tax.

Some people believe that modern insurance companies are money-making businesses which have little interest in insurance. They argue that the purpose of insurance is to spread risk so the reluctance of insurance companies to take on high-risk cases (e.g. houses in areas subject to flooding, or young drivers) runs counter to the principle of insurance.

Other criticisms include:

• Insurance policies contain too many exclusion clauses. For example, some house insurance policies do not cover damage to garden walls.

• Many insurance companies now use call centres and staff attempt to answer questions by reading from a script. It is difficult to speak to anybody with expert knowledge. While policyholders find their premium payments decrease when dealing with companies who sacrifice the use of trained insurance agents, they also risk greater financial loss due to inadequate coverage protection. Those companies who invest in educated insurance agents provide a valued service to the community. Policyholders who work with knowledgeable insurance agents are more likely to identify needs, evaluate options, purchase sufficient insurance protection, and minimize the risk of heavy financial loss for themselves and their family.

• 'Combined ratio' = loss ratio + expense ratio. Loss ratio is calculated by iding the amount of losses (sometimes including loss adjustment expenses) by the amount of earned premium. Expense ratio is calculated by iding the amount of operational expenses by the amount of written premium. A lower number indicates a better return on the amount of capital placed at risk by an insurer.
• 'SSA' = subscriber savings account.
• 'AIF' = attorney in fact.

• Earthquake loss
• List of finance topics
• List of insurance topics
• List of United States insurance companies
• Insurance Premium Tax (UK)

• ACORD
• Financial services (broader industry to which insurance belongs)
• Five for One
• Geneva Association, The (the International Association for the Study of Insurance Economics)
• Global assets under management
• Insurance law
• Intergovernmental Risk Pool
• Insurance Hall of Fame
• Subrogation
• Uberrima fides
• Social security
• Universal health care
• Welfare state

Country Specific Articles

• Insurance in Australia
• Insurance in India
• Insurance in the United States

• Federation of European Risk Management Associations
• Insurance Information Institute
• National Association of Insurance Commissioners
• The British Library - finding information on the insurance industry (UK bias)
• Insurance Bureau of Canada
• Museum of Insurance - displays thousands of antique insurance policies and ephemera
• Congressional Research Service (CRS) Reports regarding the U.S. Insurance industry
• Insurance at the Open Directory Project

An automobile or motor car is a wheeled motor vehicle for transporting passengers, which also carries its own engine or motor. Most definitions of the term specify that automobiles are designed to run primarily on roads, to have seating for one to eight people, to typically have four wheels, and to be constructed principally for the transport of people rather than goods.1 However, the term "automobile" is far from precise, because there are many types of vehicles that do similar tasks.

comes via the French language, from the Greek language by combining [self] with [moving]; meaning a vehicle that moves itself, rather than being pulled or pushed by a separate animal or another vehicle. The alternative name is believed to originate from the Latin word or [wheeled vehicle], or the Middle English word [cart] (from Old North French), and ; a Gallic wagon.23

As of 2002, there were 590 million passenger cars worldwide (roughly one car per eleven people).4

Although Nicolas-Joseph Cugnot is often credited with building the first self-propelled mechanical vehicle or automobile in about 1769 by adapting an existing horse-drawn vehicle, this claim is disputed by some, who doubt Cugnot's three-wheeler ever ran or was stable. Others claim Ferdinand Verbiest, a member of a Jesuit mission in China, built the first steam-powered vehicle around 1672 which was of small scale and designed as a toy for the Chinese Emperor that was unable to carry a driver or a passenger, but quite possibly, was the first working steam-powered vehicle ('auto-mobile').56 What is not in doubt is that Richard Trevithick built and demonstrated his road locomotive in 1801, believed by many to be the first demonstration of a steam-powered road vehicle although it was unable to maintain sufficient steam pressure for long periods, and would have been of little practical use.

In Russia, in the 1780s, Ivan Kulibin developed a human-pedalled, three-wheeled carriage with modern features such as a flywheel, brake, gear box, and bearings; however, it was not developed further.7

François Isaac de Rivaz, a Swiss inventor, designed the first internal combustion engine, in 1806, which was fueled by a mixture of hydrogen and oxygen and used it to develop the world's first vehicle, albeit rudimentary, to be powered by such an engine. The design was not very successful, as was the case with others such as Samuel Brown, Samuel Morey, and Etienne Lenoir with his hippomobile, who each produced vehicles (usually adapted carriages or carts) powered by clumsy internal combustion engines.8

In November 1881 French inventor Gustave Trouvé demonstrated a working three-wheeled automobile that was powered by electricity. This was at the International Exhibition of Electricity in Paris.9

Although several other German engineers (including Gottlieb Daimler, Wilhelm Maybach, and Siegfried Marcus) were working on the problem at about the same time, Karl Benz generally is acknowledged as the inventor of the modern automobile.8

An automobile powered by his own four-stroke cycle gasoline engine was built in Mannheim, Germany by Karl Benz in 1885 and granted a patent in January of the following year under the auspices of his major company, Benz & Cie., which was founded in 1883. It was an integral design, without the adaptation of other existing components and including several new technological elements to create a new concept. This is what made it worthy of a patent. He began to sell his production vehicles in 1888.

In 1879 Benz was granted a patent for his first engine, which had been designed in 1878. Many of his other inventions made the use of the internal combustion engine feasible for powering a vehicle.

His first was built in 1885 and he was awarded the patent for its invention as of his application on January 29, 1886. Benz began promotion of the vehicle on July 3, 1886 and approximately 25 Benz vehicles were sold between 1888 and 1893, when his first four-wheeler was introduced along with a model intended for affordability. They also were powered with four-stroke engines of his own design. Emile Roger of France, already producing Benz engines under license, now added the Benz automobile to his line of products. Because France was more open to the early automobiles, initially more were built and sold in France through Roger than Benz sold in Germany.

In 1896, Benz designed and patented the first internal-combustion flat engine, called a in German. During the last years of the nineteenth century, Benz was the largest automobile company in the world with 572 units produced in 1899 and because of its size, Benz & Cie., became a joint-stock company.

Daimler and Maybach founded Daimler Motoren Gesellschaft (Daimler Motor Company, DMG) in Cannstatt in 1890 and under the brand name, , sold their first automobile in 1892, which was a horse-drawn stagecoach built by another manufacturer, that they retrofitted with an engine of their design. By 1895 about 30 vehicles had been built by Daimler and Maybach, either at the Daimler works or in the Hotel Hermann, where they set up shop after falling out with their backers. Benz and the Maybach and Daimler team seem to have been unaware of each other's early work. They never worked together because by the time of the merger of the two companies, Daimler and Maybach were no longer part of DMG.

Daimler died in 1900 and later that year, Maybach designed an engine named , that was placed in a specially-ordered model built to specifications set by Emil Jellinek. This was a production of a small number of vehicles for Jellinek to race and market in his country. Two years later, in 1902, a new model DMG automobile was produced and the model was named Mercedes after the Maybach engine which generated 35 hp. Maybach quit DMG shortly thereafter and opened a business of his own. Rights to the brand name were sold to other manufacturers.

Karl Benz proposed co-operation between DMG and Benz & Cie. when economic conditions began to deteriorate in Germany following the First World War, but the directors of DMG refused to consider it initially. Negotiations between the two companies resumed several years later when these conditions worsened and, in 1924 they signed an , valid until the year 2000. Both enterprises standardized design, production, purchasing, and sales and they advertised or marketed their automobile models jointly—although keeping their respective brands.

On June 28, 1926, Benz & Cie. and DMG finally merged as the company, baptizing all of its automobiles as a brand honoring the most important model of the DMG automobiles, the Maybach design later referred to as the , along with the Benz name. Karl Benz remained a member of the board of directors of Daimler-Benz until his death in 1929 and at times, his two sons participated in the management of the company as well.

In 1890, Emile Levassor and Armand Peugeot of France began producing vehicles with Daimler engines and so laid the foundation of the automobile industry in France.

The first design for an American automobile with a gasoline internal combustion engine was drawn in 1877 by George Selden of Rochester, New York, who applied for a patent for an automobile in 1879, but the patent application expired because the vehicle was never built and proved to work (a requirement for a patent). After a delay of sixteen years and a series of attachments to his application, on November 5, 1895, Selden was granted a United States patent () for a two-stroke automobile engine, which hindered, more than encouraged, development of automobiles in the United States. His patent was challenged by Henry Ford and others, and overturned in 1911.

In Britain there had been several attempts to build steam cars with varying degrees of success with Thomas Rickett even attempting a production run in 1860.10 Santler from Malvern is recognized by the Veteran Car Club of Great Britain as having made the first petrol-powered car in the country in 189411 followed by Frederick William Lanchester in 1895 but these were both one-offs.11 The first production vehicles in Great Britain came from the Daimler Motor Company, a company founded by Harry J. Lawson in 1896 after purchasing the right to use the name of the engines. Lawson's company made its first automobiles in 1897 and they bore the name .11

In 1892, German engineer Rudolf Diesel was granted a patent for a "New Rational Combustion Engine". In 1897 he built the first Diesel Engine.8 Steam-, electric-, and gasoline-powered vehicles competed for decades, with gasoline internal combustion engines achieving dominance in the 1910s.

Although various pistonless rotary engine designs have attempted to compete with the conventional piston and crankshaft design, only Mazda's version of the Wankel engine has had more than very limited success.

The large-scale, production-line manufacturing of affordable automobiles was debuted by Ransom Olds at his Oldsmobile factory in 1902. This concept was greatly expanded by Henry Ford, beginning in 1914.

As a result, Ford's cars came off the line in fifteen minute intervals, much faster than previous methods, increasing production by seven to one (requiring 12.5 man-hours before, 1 hour 33 minutes after), while using less manpower.12 It was so successful, paint became a bottleneck. Only Japan black would dry fast enough, forcing the company to drop the variety of colors available before 1914, until fast-drying Duco lacquer was developed in 1926. This is the source of Ford's apocryphal remark, "any color as long as it's black".12 In 1914, an assembly line worker could buy a Model T with four months' pay.12

Ford's complex safety procedures—especially assigning each worker to a specific location instead of allowing them to roam about—dramatically reduced the rate of injury. The combination of high wages and high efficiency is called "Fordism," and was copied by most major industries. The efficiency gains from the assembly line also coincided with the economic rise of the United States. The assembly line forced workers to work at a certain pace with very repetitive motions which led to more output per worker while other countries were using less productive methods.

In the automotive industry, its success was dominating, and quickly spread worldwide seeing the founding of Ford France and Ford Britain in 1911, Ford Denmark 1923, Ford Germany 1925; in 1921, Citroen was the first native European manufacturer to adopt the production method. Soon, companies had to have assembly lines, or risk going broke; by 1930, 250 companies which did not, had disappeared.12

Development of automotive technology was rapid, due in part to the hundreds of small manufacturers competing to gain the world's attention. Key developments included electric ignition and the electric self-starter (both by Charles Kettering, for the Cadillac Motor Company in 1910-1911), independent suspension, and four-wheel brakes.

Since the 1920s, nearly all cars have been mass-produced to meet market needs, so marketing plans often have heavily influenced automobile design. It was Alfred P. Sloan who established the idea of different makes of cars produced by one company, so buyers could "move up" as their fortunes improved.

Reflecting the rapid pace of change, makes shared parts with one another so larger production volume resulted in lower costs for each price range. For example, in the 1930s, LaSalles, sold by Cadillac, used cheaper mechanical parts made by Oldsmobile; in the 1950s, Chevrolet shared hood, doors, roof, and windows with Pontiac; by the 1990s, corporate drivetrains and shared platforms (with interchangeable brakes, suspension, and other parts) were common. Even so, only major makers could afford high costs, and even companies with decades of production, such as Apperson, Cole, Dorris, Haynes, or Premier, could not manage: of some two hundred American car makers in existence in 1920, only 43 survived in 1930, and with the Great Depression, by 1940, only 17 of those were left.12

In Europe much the same would happen. Morris set up its production line at Cowley in 1924, and soon outsold Ford, while beginning in 1923 to follow Ford's practise of vertical integration, buying Hotchkiss (engines), Wrigley (gearboxes), and Osberton (radiators), for instance, as well as competitors, such as Wolseley: in 1925, Morris had 41% of total British car production. Most British small-car assemblers, from Abbey to Xtra had gone under. Citroen did the same in France, coming to cars in 1919; between them and other cheap cars in reply such as Renault's 10CV and Peugeot's 5CV, they produced 550,000 cars in 1925, and Mors, Hurtu, and others could not compete.12 Germany's first mass-manufactured car, the Opel 4PS (Tree Frog), came off the line at Russelsheim in 1924, soon making Opel the top car builder in Germany, with 37.5% of the market.12

Most automobiles in use today are propelled by gasoline (also known as petrol) or diesel internal combustion engines, which are known to cause air pollution and are also blamed for contributing to climate change and global warming.13 Increasing costs of oil-based fuels, tightening environmental laws and restrictions on greenhouse gas emissions are propelling work on alternative power systems for automobiles. Efforts to improve or replace existing technologies include the development of hybrid vehicles, and electric and hydrogen vehicles which do not release pollution into the air.

Diesel-engined cars have long been popular in Europe with the first models being introduced in the 1930s by Mercedes Benz and Citroen. The main benefit of diesel engines is a 50% fuel burn efficiency compared with 27%14 in the best gasoline engines. A down-side of the Diesel engine is that better filters are required to reduce the presence in the exhaust gases of fine soot particulates called diesel particulate matter. Manufacturers are now starting to fit diesel particulate filters filters to remove the soot. Many diesel-powered cars can run with little or no modifications on 100% biodiesel and combinations of other organic oils.

Gasoline engines have the advantage over diesel in being lighter and able to work at higher rotational speeds and they are the usual choice for fitting in high-performance sports cars. Continuous development of gasoline engines for over a hundred years has produced improvements in efficiency and reduced pollution. The carburetor was used on nearly all road car engines until the 1980s but it was long realised better control of the fuel/air mixture could be achieved with fuel injection. Indirect fuel injection was first used in aircraft engines from 1909, in racing car engines from the 1930s, and road cars from the late 1950s.14 Gasoline Direct Injection (GDI) is now starting to appear in production vehicles such as the 2007 (Mark II) BMW Mini. Exhaust gases are also cleaned up by fitting a catalytic converter into the exhaust system. Clean air legislation in many of the car industries most important markets has made both catalysts and fuel injection virtually universal fittings. Most modern gasoline engines also are capable of running with up to 15% ethanol mixed into the gasoline - older vehicles may have seals and hoses that can be harmed by ethanol. With a small amount of redesign, gasoline-powered vehicles can run on ethanol concentrations as high as 85%. 100% ethanol is used in some parts of the world (such as Brazil), but vehicles must be started on pure gasoline and switched over to ethanol once the engine is running. Most gasoline engined cars can also run on LPG with the addition of an LPG tank for fuel storage and carburettor modifications to add an LPG mixer. LPG produces fewer toxic emissions and is a popular fuel for fork-lift trucks that have to operate inside buildings.

Ethanol, other alcohol fuels (biobutanol) and biogasoline have widespread use an automotive fuel. Most alcohols have less energy per liter than gasoline and are usually blended with gasoline. Alcohols are used for a variety of reasons - to increase octane, to improve emissions, and as an alternative to petroleum based fuel, since they can be made from agricultural crops. Brazil's ethanol program provides about 20% of the nation's automotive fuel needs, as a result of the mandatory use of E25 blend of gasoline throughout the country, 3 million cars that operate on pure ethanol, and 6 million dual or flexible-fuel vehicles sold since 2003.15 that run on any mix of ethanol and gasoline. The commercial success of "flex" vehicles, as they are popularly known, have allowed sugarcane based ethanol fuel to achieve a 50% market share of the gasoline market by April 2008.161718

The first electric cars were built around 1832, well before internal combustion powered cars appeared.19 For a period of time electrics were considered superior due to the silent nature of electric motors compared to the very loud noise of the gasoline engine. This advantage was removed with Hiram Percy Maxim's invention of the muffler in 1897. Thereafter internal combustion powered cars had two critical advantages: 1) long range and 2) high specific energy (far lower weight of petrol fuel versus weight of batteries). The building of battery electric vehicles that could rival internal combustion models had to wait for the introduction of modern semiconductor controls and improved batteries. Because they can deliver a high torque at low revolutions electric cars do not require such a complex drive train and transmission as internal combustion powered cars. Some post-2000 electric car designs such as the Venturi Fétish are able to accelerate from 0-60 mph (96 km/h) in 4.0 seconds with a top speed around 130 mph (210 km/h). Others have a range of 250 miles (400 km) on the EPA highway cycle requiring 3-1/2 hours to completely charge.20 Equivalent fuel efficiency to internal combustion is not well defined but some press reports give it at around 135 miles per US gallon (57 km/l/162 mpg-imp).

Steam power, usually using an oil- or gas-heated boiler, was also in use until the 1930s but had the major disadvantage of being unable to power the car until boiler pressure was available (although the newer models could achieve this in well under a minute). It has the advantage of being able to produce very low emissions as the combustion process can be carefully controlled. Its disadvantages include poor heat efficiency and extensive requirements for electric auxiliaries.21

A compressed air car is an alternative fuel car that uses a motor powered by compressed air. The car can be powered solely by air, or by air combined (as in a hybrid electric vehicle) with gasoline/diesel/ethanol or electric plant and regenerative braking. Instead of mixing fuel with air and burning it to drive pistons with hot expanding gases; use the expansion of compressed air to drive their pistons. Several prototypes are available already and scheduled for worldwide sale by the end of 2008. Companies releasing this type of car include Tata Motors and Motor Development International (MDI).

In the 1950s there was a brief interest in using gas turbine engines and several makers including Rover and Chrysler produced prototypes. In spite of the power units being very compact, high fuel consumption, severe delay in throttle response, and lack of engine braking meant no cars reached production.

Rotary Wankel engines were introduced into road cars by NSU with the Ro 80 and later were seen in the Citroën GS Birotor and several Mazda models. In spite of their impressive smoothness, poor reliability and fuel economy led to them largely disappearing. Mazda, beginning with the R100 then RX-2, has continued research on these engines, overcoming most of the earlier problems with the RX-7 and RX-8.

A rocket car holds the record in drag racing. However, the fastest of those cars are used to set the Land Speed Record, and are propelled by propulsive jets emitted from rocket, turbojet, or more recently and most successfully turbofan engines. The ThrustSSC car using two Rolls-Royce Spey turbofans with reheat was able to exceed the speed of sound at ground level in 1997.

There are three main statistics to which automobile safety can be compared:22

While road traffic injuries represent the leading cause in worldwide injury-related deaths,23 their popularity undermines this statistic.

Mary Ward became one of the first documented automobile fatalities in 1869 in Parsonstown, Ireland24 and Henry Bliss one of the United States' first pedestrian automobile casualties in 1899 in New York.25 There are now standard tests for safety in new automobiles, like the EuroNCAP and the US NCAP tests,26 as well as insurance-backed IIHS tests.27

The costs of automobile usage, which may include the cost of: acquiring the vehicle, repairs, maintenance, fuel, depreciation, parking fees, tire replacement, taxes and insurance,28 are weighed against the cost of the alternatives, and the value of the benefits - perceived and real - of vehicle usage. The benefits may include on-demand transportation, mobility, independence and convenience.6

Similarly the costs to society of encompassing automobile use, which may include those of: maintaining roads, land use, pollution, public health, health care, and of disposing of the vehicle at the end of its life, can be balanced against the value of the benefits to society that automobile use generates. The societal benefits may include: economy benefits, such as job and wealth creation, of automobile production and maintenance, transportation provision, society wellbeing derived from leisure and travel opportunities, and revenue generation from the tax opportunities. The ability for humans to move flexibly from place to place has far reaching implications for the nature of societies. 29

Transportation is a major contributor to air pollution in most industrialised nations. According to the American Surface Transportation Policy Project nearly half of all Americans are breathing unhealthy air. Their study showed air quality in dozens of metropolitan areas has got worse over the last decade.30 In the United States the average passenger car emits 11,450 lbs (5 tonnes) of carbon dioxide, along with smaller amounts of carbon monoxide, hydrocarbons, and nitrogen.31 Residents of low-density, residential-only sprawling communities are also more likely to die in car collisions, which kill 1.2 million people worldwide each year, and injure about forty times this number.23 Sprawl is more broadly a factor in inactivity and obesity, which in turn can lead to increased risk of a variety of diseases.32

Fuel taxes may act as an incentive for the production of more efficient, hence less polluting, car designs (e.g. hybrid vehicles) and the development of alternative fuels. High fuel taxes may provide a strong incentive for consumers to purchase lighter, smaller, more fuel-efficient cars, or to not drive. On average, today's automobiles are about 75 percent recyclable, and using recycled steel helps reduce energy use and pollution.33 In the United States Congress, federally mandated fuel efficiency standards have been debated regularly, passenger car standards have not risen above the 27.5 miles per US gallon (11.7 km/l/33.0 mpg-imp) standard set in 1985. Light truck standards have changed more frequently, and were set at 22.2 miles per US gallon (9.4 km/l/26.7 mpg-imp) in 2007.34 Alternative fuel vehicles are another option that is less polluting than conventional petroleum powered vehicles.

Automobile propulsion technology under development include gasoline/electric and plug-in hybrids, battery electric vehicles, hydrogen cars, biofuels, and various alternative fuels.

Research into future alternative forms of power include the development of fuel cells, Homogeneous Charge Compression Ignition (HCCI), stirling engines35, and even using the stored energy of compressed air or liquid nitrogen.

New materials which may replace steel car bodies include duraluminum, fiberglass, carbon fiber, and carbon nanotubes.

Telematics technology is allowing more and more people to share cars, on a pay-as-you-go basis, through such schemes as City Car Club in the UK, Mobility in mainland Europe, and Zipcar in the US.

Established alternatives for some aspects of automobile use include public transit (buses, trolleybuses, trains, subways, monorails, tramways), cycling, walking, rollerblading, skateboarding, horseback riding and using a velomobile. Car-share arrangements and carpooling are also increasingly popular–the U.S. market leader in car-sharing has experienced double-digit growth in revenue and membership growth between 2006 and 2007, offering a service that enables urban residents to "share" a vehicle rather than own a car in already congested neighborhoods.36 Bike-share systems have been tried in some European cities, including Copenhagen and Amsterdam. Similar programs have been experimented with in a number of U.S. Cities.37 Additional inidual modes of transport, such as personal rapid transit could serve as an alternative to automobiles if they prove to be socially accepted.38

• Air pollution
• Bus
• Car classification
• Car donation
• Driving
• List of countries by automobile production
• List of countries by vehicles per capita
• Lists of automobiles
• Steering
• Society of Automotive Engineers
• Sustainable transport
• Truck
• U.S. Automobile Production Figures - production figures for each make from 1899 to 2000
• V2G
• V2V

• Halberstam, David, , New York : Morrow, 1986. ISBN 0688048382
• Kay, Jane Holtz, , New York : Crown Publishers, 1997. ISBN 0517587025

• Fédération Internationale de l'Automobile