No-Fault Automobile Insurance
A Policy Perspective
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.