The U.S. Experience with No-Fault Automobile Insurance

No-fault automobile-insurance regimes were the culmination of decades of dissatisfaction with the use of the traditional tort system for compensating victims of automobile accidents. They promised quicker, fairer, less-contentious, and, it was hoped, less-expensive resolution of automobile-accident injuries. This monograph considers how these plans have fared. After reviewing the intellectual and political history of no-fault auto insurance, the monograph concludes that no-fault lost political popularity because of the perception that it did not deliver the promised consumer premium cost reductions. Analysis of data from a variety of sources confirms this view, demonstrating that premiums and claim costs have become substantially larger in no-fault states than in other states over time. These cost increases can be traced to a variety of factors, including growth in excess claiming in no-fault states and convergence between no-fault and tort states in litigation patterns and noneconomic-damage payments. However, the primary driver of no-fault's cost growth has been high medical costs. The extent to which these additional costs represent augmented utilization of medical services rather than cost shifting from the medical insurance system to the automobile insurance system remains unclear.