The comparative costs of allowing consumer choice for auto insurance in all fifty states

by Jeffrey O'Connell, Stephen J. Carroll, Michael Horowitz, Allan Abrahamse, Lewis Jamison, Paul F. Jamieson


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This article presents actuarial results for all fifty states, including those currently with no-fault laws, focusing on the effects of the plan allowing choice (to give up tort claims for noneconomic loss) on the costs of personal, that is, private passenger, auto insurance. The authors first estimate what auto insurers would have to charge the average insured motorist to recover the costs incurred in compensating accident victims under all coverages and limits under the status quo. They also estimate separately the costs of those buying only mandatory coverages and limits. The authors then develop corresponding estimates for motorists who elect to retain the status quo and for motorists who switch to the new plan allowing choice. Next, these estimates are compared to determine how the adoption of the plan allowing choice would affect the costs of auto insurance, depending on whether motorists stay or switch, and whether they buy more than mandatory coverages. Savings on the order of 20 to 40 percent would be attained in almost every state, which would translate into about half that percentage savings in total auto premiums, including the premium components for both personal injury and all car damage.

Originally published in: Maryland Law Review, v. 55, no. 1, 1996, pp. 160-222.

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