Well, not really. When automobiles first arrived, the tort notion of fault was so deeply embedded in our legal system around 1900, it was taken for granted that the origins of automobile law would rest on a fault system. When an accident occurred, fault would be determined, and then liability assessed. However, since there were irresponsible drivers, meaning drivers who don't have the financial means to make whole a person whose property or body they might injure through an automobile accident, there was no way of assuring that even though fault was assessed that the victim of an automobile accident would be able to collect from the tortfeasor. This led to the almost simultaneous creation in CT and MA of the first financial responsibility and compulsory insurance laws, respectively.
Until the 1970's, most states had "financial responsibility" laws rather than compulsory auto insurance. Connecticut started the thing in the mid-1920's by its requirement that an owner of a vehicle involved in an accident causing death or personal injury, or property damages in excess of $100, had to then prove financial responsibility to satisfy any claim for damages, by reason of personal injury, to, or death of, any person, of at least $10,000. The CT statute had four ways by which a person could demonstrate the required level of "financial responsibility" (1) having liability insurance to the required amount, (2) posting a bond when required, (3) depositing cash, or (4) depositing stocks or bonds sufficient to cover the amount of the judgment. Suspension of license was the penalty for failure to comply.
Demand for proof of financial responsibility was usually made only after an aggrieved party filed a complaint. So, automobile insurance both optional and retroactive. In effect, everyone got a Get out of Jail Free card, where after the first accident the State would clamp down on them. But even at that, unless the first accident resulted in a complaint getting filed, that wasn't enough to invoke the law that you had to provide financial responsibility. Over the next 50 odd years most other states passed the same type of financial responsibility laws.
At the same time CT passed its financial responsibility laws (couple of years later, actually), Massachusetts went one step further and made liability insurance compulsory when registering the automobile. For 25 years it was the only state to have such a law. Massachusetts was a very pro-consumer state, while Connecticut was a very pro-insurance state (being the home of the insurance industry), so one would think that "compulsory" and merely "financially responsible" would have occurred in the opposite manner in each other's state. But the insurance companies fought compulsory insurance, because with compulsory insurance they had to cover everybody, good drivers and morons alike.
With the 50's came the cars of the 50's and all the romance that came with it, both in and of the cars, and with times being good and everyone having one, the number of cars on the roads exploded, and so did miles driven. Accidents and injuries became more more common as well as more expensive, and more and more people were unable to show financial responsibility. A couple of states enacted compulsory insurance in the late 50's, and then in the 60's and 70's most states followed suit, each and every one of them over the objections of auto insurers. Only 2 or 3 states currently do not have compulsory insurance. New Hampshire doesn't, and I don't think Wisconsin requires it, yet. In Virginia you don't have to purchase liability insurance, but if you don't then you have to pay a $500 annual fee to the state.
The insurance companies would much rather be able to pick and choose who they want to cover, and be able to deny someone liability coverage at their whim, rather than be forced to cover anyone and everyone. They can jack up your premiums of you're high risk, but eliminating that high risk is something they'd much rather do.
