Effects of a Choice Automobile Insurance Plan on Costs and Premiums

by Stephen J. Carroll

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Testimony presented to the Senate Commerce, Science and Transportation Committee, July 1997. This testimony presents the results of an analysis of how a plan that offers a choice between tort and absolute no-fault (ANF) would affect the costs of auto insurance in each of the states in 1987, the most recent year for which data were available at the time of the study. Researchers at RAND found that the choice plan examined can dramatically reduce the costs of personal injury coverages to policy owners who opt for ANF, relative to the costs of providing personal injury coverages to the same policy owners under their state’s current auto insurance system. The analysis also suggests that the choice plan examined will have little effect on policy owners who opt to remain under their state’s current auto insurance system. They will recover as much for their injuries and losses as they would under their state’s current system, and the results suggest that there will not be any significant change in their insurance premiums.

This report is part of the RAND Corporation Testimony series. RAND testimonies record testimony presented by RAND associates to federal, state, or local legislative committees; government-appointed commissions and panels; and private review and oversight bodies.

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