No-Fault Automobile Insurance

A Policy Perspective

by Stephen J. Carroll, James S. Kakalik, David M. Adamson


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This report considers what would happen if a state adopted a no-fault auto insurance system. Specifically, it examines (1) how a no-fault plan would affect the costs of compensating for injuries, the amount spent on transactions, the adequacy and equity of injury compensation, and the timeliness of compensation; (2) how the design of the no-fault plan would influence these effects; and (3) how these effects would vary between states. The authors conclude that no-fault can yield substantial savings over the traditional system or it may increase costs, depending on the no-fault plan's provisions and on differences among states in factors that affect the auto-insurance system. They also conclude that no-fault plans reduce transaction costs, align injury compensation more closely with economic loss, eliminate compensation for noneconomic loss for less serious injuries, and generally speed up compensation.

This report is part of the RAND Corporation Report series. The report was a product of the RAND Corporation from 1948 to 1993 that represented the principal publication documenting and transmitting RAND's major research findings and final research.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.