Deterrent Aspects of No-Fault Automobile Insurance: Some Empirical Findings

Abstract

Will no-fault automobile insurance lead to a deterioration of driver attitudes, to a weakening of police enforcement efforts and to a tragic increase in deaths and injuries? Proponents of no-fault insurance argue no; opponents argue yes; and some analysts argue that automobile insurance, regardless of type, is unrelated to driving behavior. In this study, the authors analyze the driving behavior consequences of no-fault automobile insurance by formulating a model of traffic fatality rates and estimating the parameters of this model using cross-sectional state data for the years 1975, 1976 and 1977. The model explains approximately 60 percent of the state to state variation in fatality rates. Generally, state characteristics and driving environment variables are related to fatality rates as hypothesized. In addition, the results indicate that fears of a dramatic escalation of fatal accidents because of no-fault insurance are unfounded. Even on a theoretical basis such fears have weak underpinnings. On an empirical basis, they appear to have no foundation whatsoever.