Color

There are two bills currently pending in the U.S. Congress, Senate Bill S.625 and House Bill HR.2021. Both bills are very similar, and both eliminate the rights of the individual states to determine what system of automobile liability insurance is best for their citizens.

These bills will be debated by the U.S. Congress beginning in January of 1998 and it is important that every citizen know the true facts regarding a so-called “Choice No-Fault Bill.” The No-Fault experiment has failed in every state in which it has been tried, and the following information is detailed analysis from these failed experiments and information from the National Association of Insurance Commissioners and A.M. Best.

The proponents of the “Choice” No-Fault Bill claim that their goal is to provide consumers with a “choice” between no-fault and a tort based system. but the bill’s choices are illusory.

The so-called “Auto Choice Reform Act of 1997” would limit consumers’ ability to receive full compensation in auto collisions. This plan would give people no real choice at all, but would instead impose the failed 1970’s no-fault system on all states and all drivers. This legislation would usurp state authority to regulate their insurance industries, and would force responsible drivers to pay for irresponsible drivers.

No-Fault Equals No-Choice.
The rights of those who “choose” tort coverage would depend on the “choice” made by the other driver. Tort drivers in collisions caused by no-fault drivers would have to collect from their own insurer, not the negligent driver’s liability coverage. The “choice” in this bill is not between retaining one’s full legal rights under current law and switching to a no-fault system. Instead, it only allows drivers to choose between two limited coverage options.

Good Drivers Will Pay For Bad.
It is only fair that a safe driver should not have to pay as much for auto insurance as someone who has been careless. The traditional tort system provides incentives for safety. Under a no-fault system, good drivers would have to pay more, even if the collision is not their fault, since they would receive a surcharge for their claim. At a time when government leaders are calling for a greater personal accountability, the no-fault scheme would undermine attempts to hold individuals accountable for their actions.

“Choice” No-Fault Would Preempt State Authority.
Historically, state legislatures have been well-equipped to tailor their auto insurance systems to meet their unique urban and rural needs. It would be ill-advised for Congress to impose a “one size fits all” structure to a system that varies drastically from state to state. At a time when both the President and Congressional leaders are fighting to shrink the size of government and ease regulatory burdens, Congress should not take away the authority of the states, which are much better equipped to control their own insurance systems. Compliance to such a change could, in fact, place an unintended unfunded mandate requirement on the states.

Stepping away from accountability:
Under the “choice” bill, every driver loses his right to full restitution from a person who causes a collision. The goal of the civil justice system and tort-based liability is to make a person who is not responsible for an injury “whole,” with just compensation for all their injuries. The No-Fault/Choice Bill would turn away from that principle, and would therefore undermine the goals of accountability and individual responsibility.

The “choice” plan will drive up costs for those who maintain limited tort coverage, by shifting costs from no-fault drivers. The choice plan would shove costs currently covered by each driver onto tort drivers. Currently in traditional tort states, each driver carries coverage for liability they incur for injuries to others. Under the proposed “choice” system, tort drivers would have to carry insurance not only for the injuries they cause, but also for injuries to themselves inflicted by no-fault drivers. By requiring this double coverage, it inevitably inflates the cost of tort coverage.

No-fault is a failed system that has not reduced costs.
The promises made by no-fault proponents are lower insurance premiums and costs than under a fault-based system. In fact, no-fault systems that have been imposed in the states have not reduced insurance costs. The five states with the highest average automobile insurance rates are no-fault states. Conversely, seven of the ten lowest-cost states are traditional tort systems.

A key reason that no-fault proposals continue to be advocated is that insurance companies find it increases their profits. Aggregate industry profitability for liability insurance in no-fault states is 15% greater than in traditional tort states. This increased profitability is not hard to understand. No-fault severely limits the individual’s right to recover for injuries, holding insurance payouts down, and making it easy for insurers to predict potential costs. Insurers will not return the supposed savings from no-fault to their policyholder -- they will just keep it.

No-fault is a discredited remedy to high insurance rates.
No state has switched from a tort system to a no-fault system since 1976. Several states that had enacted no-fault laws have since repealed them, and have reduced premiums as a result. In Georgia, premiums decreased by 9 -10% since the repeal of no-fault in 1991. In Connecticut, rates declined for liability coverage and 6% overall after repeal. Clearly, the momentum on this issue is away from enacting such plans.