The effects of a choice automobile insurance plan on insurance costs and compensation

by Allan Abrahamse, Stephen J. Carroll

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This study estimates the effects of offering drivers in each state a choice between their state's current insurance system and an absolute no-fault plan in which motorists neither recover nor are liable for noneconomic loss for any accident injury. If insurance premiums are proportional to compensation costs, drivers in the tort states who choose absolute no-fault should save about 60 percent on their premiums for personal injury coverage. Drivers in the current no-fault states who elect absolute no-fault should save roughly 33 to 50 percent on their personal injury costs. Drivers who choose to stay in their state's current insurance plan will generally realize some savings.

Originally published in: CPCU Journal, v. 51, no. 1, Spring 1998, pp. 19-39.

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