The Effect of No-fault on Fatal Accident Rates

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 for economic losses sustained in automobile accidents, regardless of whoever is at fault, and prohibits individuals from suing for non-economic damages (for example, for pain and suffering) unless their injuries exceed some established threshold. 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. Firstparty 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 may ultimately lead to higher auto insurance costs by reducing drivers’ incentives to drive carefully and thereby increasing the accident rate. The intuition behind this criticism of no-fault is simple: No-fault auto insurance lowers the cost of driving negligently by limiting first-party liability for the injuries suffered by third parties in auto accidents. This study evaluates this criticism of no-fault by examining trends in fatal and nonfatal automobile accident rates and rates of driver negligence in the United States between 1967 and 1989.