Car Accident Newsroom

No Fault Auto Insurance Unrelated to Accident Rates

A new RAND study refutes a common criticism of no-fault auto insurance--that it may increase the accident rate by reducing drivers' incentives to drive carefully. An analysis of accident trends in the United States between 1967 and 1989 found no statistically significant relationship between states' adoption of a no-fault system and the fatal accident rate, overall accident rates, and other measures of driver care.

Thirteen states currently either mandate no-fault auto insurance or allow drivers to choose between no-fault and tort insurance. No-fault auto insurance requires individuals to carry personal injury protection (PIP) insurance that compensates them, regardless of fault, for economic losses sustained in automobile accidents and prohibits individuals from suing for non-economic damages such as pain and suffering unless their injuries exceed an established threshold. In contrast, under a traditional tort-based auto insurance system, all drivers must carry liability insurance that compensates third parties for injuries caused by the insured driver. First-party insurance under tort is typically voluntary.

Proponents of no-fault auto insurance claim the system delivers speedier and more-equitable compensation at lower cost than traditional tort insurance. However, its opponents frequently counter that no-fault lowers the cost of driving negligently by limiting first-party liability for the injuries suffered by third parties in auto accidents. Under such a scenario, no-fault would increase the accident rate and also lead to higher auto insurance costs.