NCPA - National Center for Policy Analysis

Rand Study: No Fault Insurance, No Effect On Accident Rates

July 18, 2001

Some studies have found that no-fault auto insurance increases accident rates by reducing drivers' incentives to drive carefully. But a RAND analysis of accident trends in the United States between 1967 and 1998 found no significant difference between accident rates in no-fault and tort liability auto insurance states.

  • 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 or severely limits lawsuits for non-economic damages such as pain and suffering.
  • Thirteen states currently either mandate no-fault auto insurance or allow drivers to choose between no-fault and tort insurance.
  • Under traditional tort-based auto insurance, liability insurance compensates third parties for injuries caused by the insured driver, and personal injury protection is typically voluntary.

Unlike previous studies, the RAND study compared differences in accident rates between tort and no-fault states both before and after the 1971 to 1976 period in which no-fault laws were implemented. Controlling for state characteristics,

  • In both tort and no-fault states, fatal accidents per vehicle miles traveled fell steadily -- and over the study period, by a statistically insignificant 3 percent less in no-fault states than in tort states.
  • However, negligent acts by drivers were a contributory factor in about 58 percent of fatal accidents in tort states, compared with 54 percent in no-fault states.
  • Overall accident rates were no higher in no-fault states than in tort states.

Researchers note that no-fault insurance creates many of the same incentives to drive carefully as does tort insurance. For instance, getting into an accident in a no-fault state is just as likely to increase insurance premiums as getting into an accident in a tort state.

Source: "No-Fault Auto Insurance Unrelated to Accident Rates," Research Brief, Rand Institute for Civil Justice, June 2001; based on David S. Loughran, "The Effect of No-Fault Automobile Insurance on Driver Behavior and Automobile Accidents in the United States," RAND Institute for Civil Justice, 2001, 1700 Main Street, P.O. Box 2138, Santa Monica, Calif. 90407, (310) 393-0411.

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