Massachusetts Loss Experience under No-Fault in 1971: Analysis and Implications

Abstract

In August 1972, the Massachusetts Rating Bureau filed with the State Insurance Department the first reliable compilations of aggregate loss experience data developed under no-fault in 1971. Later that same month, at ARIA's annual meeting, these compilations were utilized to compare the loss experience in 1971 with that in 1970, the last year prior to no-fault. A series of data exhibits (slides) was presented with accompanying commentary. This paper reproduces those exhibits and commentary. The new law extended benefits to 42,000 injury victims who would not have been eligible for reparation in 1970. This added $18 million to system costs. However, the law also produced an extraordinary decrease of about 75 percent in the number of tort liability claims filed in 1971 as compared with 1970. The net result was a 51 percent reduction in loss costs or $50 million. The cost results produced by no-fault in Massachusetts in 1971 have two basic dimensions: (1) the number of claims made by injury victims and (2) the total losses incurred by insurers. Division of the latter by the former provides a third derivative dimension, the average claim cost. In anticipation of the measurement of these dimensions, the Massachusetts Automobile Rating and Accident Prevention Bureau devised a new statistical plan for the 1971 coding and tabulation of claims. Some knowledge of this plan is essential to an understanding of 1971's cost results.