The Effects of a Choice Auto Insurance Plan on Insurance Costs and Compensation

by Stephen J. Carroll, Allan Abrahamse

The authors estimate the effects of offering the 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 auto accident injury. If insurance premiums are proportional to compensation costs, drivers who choose absolute no-fault should save about 45 percent on their premiums for personal injury coverage. This translates into about 21 percent savings on their total auto insurance bill. Drivers who choose to stay in their state's current insurance plan will generally realize small savings.

Originally published in: Journal of Insurance Regulation, v. 18, no. 1, Fall 1999.

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