Compulsory Automobile Insurance Research Articles

Raising compulsory automobile insurance minimum amounts: a case study from the United States

This article discusses a decision both European Union Member States and states in the United States must make: whether to raise their compulsory automobile insurance minimum amounts. The authors review a case study from the United States, the Commonwealth of Pennsylvania, and conclude a proposed increase in the compulsory minimum amounts should pass the legislator. The purpose of compulsory automobile insurance is to compensate victims of automobile accidents. Due to inflation, the minimum amounts in Pennsylvania no longer compensate adequately. Moreover, the data do not support the contention that an increase in the minimum amounts will cause large increases in premiums and uninsured rates. The authors conclude that compulsory minimum amounts should be periodically reviewed, as they are in the European Union, and that arguments about large increases in premiums and uninsured rates should be subjected to a careful review based on data.

Valid Psychological Injury Claims: Respecting the Needs of Survivors

Automobiles are potentially dangerous, with tens of thousands killed in motor vehicle accidents (MVAs) and millions badly injured annually in the USA. Because of an inability for individual accident victims or those responsible for the accidents to pay for damages incurred, compulsory automobile insurance has been developed as a risk-distribution system. On the one hand, a danger is that insurers become less interested in the well-being of their claimants and more interested in maximizing their own profitability—denying any fiduciary obligation to anyone other than their shareholders. As a result, there are examples in which these companies fail to acknowledge valid psychological injuries in a manner that precludes survivors from accessing appropriate physical and mental health care. On the other hand, a danger is that claimants malinger, attribute pre-existing psychological problems to the event at issue, or otherwise feign. This analysis examines the literature on the importance of assessing validity and treating the psychological sequelae of automobile accidents. The authors conclude by calling for balance toward accident survivors with valid injuries (but only after vetting for feigning and related motivations), thereby ensuring that they receive adequate treatment that will ameliorate their suffering and allow them to regain reasonable qualities of life. That is, insurers should maintain the right to subject complainants to independent examinations, provided that the professionals involved apply the appropriate ethical standards in their assessments and in the interpretation of test results, toward establishing their valid needs for therapy. Such a change will require extensive use of psychologists and their knowledge of testing to determine the validity of potential claims of psychological injuries. This approach would not only be ethical on the part of insurers but it should also be cost-effective in the long run.

The National Individual Health Insurance Mandate

On March 23, 2010, President Obama signed into law the nation's first comprehensive health care reform bill, the Patient Protection and Affordable Care Act. Within weeks, twenty states filed lawsuits challenging the constitutionality of its most politically charged feature--an individual purchase mandate. By 2014, the bill requires most individuals to have health insurance. With certain exceptions (pertaining to income level and religious objections), individuals without qualifying coverage will pay an annual tax penalty reaching the greater of $695 ($2,085 per family maximum) or 2.5 percent of household income. (1) If anything, the tax penalty is too low compared with the cost of insurance, so it may not provide sufficient incentive for healthy individuals to purchase insurance. But it remains controversial because it compels people to purchase coverage they choose not to have, raising the question whether Congress can lawfully and ethically require individuals to contract with, and transfer money to, a private party. (2) To be sure, the individual mandate lacks a clear American precedent. (It has worked successfully in other countries, such as Australia.) Compulsory automobile insurance, for example, is a state requirement, operates as a condition of exercising the privilege of driving, and requires coverage for injuries to others (not the insured). Personal Freedom and Collective Goods in Conflict Opposing a mandate is understandable when viewed from an individual perspective: it interferes with economic freedom and constrains personal choice. In economic terms, it represents a compelled cross-subsidy. However, when viewed from a collective perspective, the mandate offers valuable social benefits. The absence of health insurance creates harmful consequences, including lower quality of life, increased morbidity and mortality, and higher financial burdens.(3) Since these consequences fall mostly on those who lack insurance, the decision to seek insurance arguably should be left to them. However, government is responsible for the wellbeing of the community, not particular individuals. Even if the decision were primarily self-regarding, its effects--illness and death--can be felt by all. Many individuals cannot afford insurance, but others choose not to insure; over nine million people with annual incomes over seventy-five thousand dollars had no coverage in 2007. (4) Yet many previously healthy people suffer illness or injury and end up requiring treatment in emergency departments, most of which is uncompensated. Free riders rely on society to pick up the costs (forty-three billion dollars in 2008) through higher insurance premiums (above one thousand dollars annually) and higher taxes (such as hospital subsidies, Medicaid, and Medicare). Individuals often delay purchasing insurance until they become ill, creating an adverse problem for insurers. At its worst, free-riding and selection create a downward spiral of higher premiums and a shrinking insurance pool, making everyone's health care less affordable. (5) The Mandate's Constitutionality The pivotal constitutional concern is that government will penalize individuals for failing to buy health insurance--for doing nothing--simply because they are legal residents of the United States. The states could undoubtedly mandate health coverage, as with the Massachusetts Health Care Reform Plan of 2006. But the federal government has limited power; its principal enumerated are to regulate interstate commerce and to tax for the general welfare. The Supreme Court, however, has broadly construed federal powers--known as the implied powers doctrine--to uphold laws that are necessary and proper. By this reasoning, the Court ought to uphold the constitutionality of the health insurance mandate. The power to regulate interstate commerce. The Supreme Court has interpreted the commerce power broadly, applying it to virtually every aspect of economic and social life. …

Personal Premium Saving under Basic Protection

This paper outlines a method for distributing to individual policyholders the average New York statewide premium savings of 39 percent which could result from adoption of the Protection Plan. It shows the range of saving is very extensive; dollar savings for a low income insured may be double the average, while savings may be very small for some high income policyholders. Also, as the amount of increased limits coverage is added, the relative dollar amount saved increases; for $25,000/ $50,000 limits with $5,000 medical payments coverage, savings may range up to 67 percent from present costs. Savings will be largest for low income insureds in communities with low rates and will increase as available benefits from collateral sources increase. Almost everybody could receive some saving in insurance premium cost under a Protection Plan. The total possible reductions are substantial to the point of being shocking . Previous studies 1 have estimated the average statewide effect on automobile insurance premium costs if the ProFrank Harwayne, F.C.A.S. has been Chief Actuary for the New York Insurance Department since 1952. He was a founding director of the American Academy of Actuaries and has been consulting actuary to federal, state and Canadian governments as well as Harvard University. Mr. Harwayne has taught mathematics and insurance at C.C.N.Y., Pace College and the College of Insurance. This article was submitted for publication in July, 1968. It was prepared for the Study of Automobile Claims Systems of Harvard Law School. 1 Harwayne, Insurance Costs of Automobile Protection Plan in Relation to Automobile Bodily Injury Liability Costs, LIII Proceedings of the Casualty Actuarial Society, 122 (1966). Concerning this same study, which related to New York state, see also Keeton & O'Connell, Protection and the Costs of Traffic Accidents, 38 N.Y.S.B.J. 255 (1966). For a Michigan study, see Harwayne, Insurance Costs of Protection Plan in Michigan, 1967 U. Ill. L. F. 479; also printed in Crisis in Car Insurance 119 (R. Keeton, J. O'Connell & J. McCord, eds., 1968). For a further New York state study, see The Relative Cost of Protection Insurance in New York State-An Objective Determination, (copyright 1968, Frank Harwayne). tection Plan2 were adopted. This study 2 The Protection Automobile Insurance Plan is set forth most fully, along with an attempt to document its pressing need and a draft statute, in R. Keeton & J. O'Connell, Protection for the Traffic Victim: A Blueprint for Reforming Automobile Insurance (1965) [hereinafter cited as Protection]. For a slightly revised and updated version of Chapter 6 of this book, see Keeton & O'Connell, Basic Protection Automobile Insurance, 1967 U. Ill. L. F. 400, 408-39; also printed in Crisis in Car Insurance 40, 48-79. See also R. Keeton & J. O'Connell, After Cars Crash-The Need for Legal and Insurance Reform (1967), a version written for the general reader. The Protection plan has two principal elements: (1) a new form of compulsory automobile insurance (called Protection coverage) will pay all those injured in traffic accidents without regard to anyone's fault or lack of it. Protection Insurance will compensate for losses up to limits of $10,000 per victim for any victim's out-of-pocket losses-which consist mainly of medical expenses and wage losses. Payment would not be made under B.P. for pain and suffering. Whenever a motorist carrying B.P. insurance is involved in an accident, and he, or a guest, or a pedestrian, is hurt, the motorist's own basic protection insurance company will compensate him or his guest or the pedestrian. (2) The second element is a law that partially exempts from liability for negaligent driving all

Compulsory Automobile Insurance in Europe by Frank Astill of the staff of the Pearl Assurance Company of London.

Compulsory Automobile Insurance in Europe by Frank Astill of the staff of the Pearl Assurance Company of London.

Compulsory Automobile Liability Insurance in Australasia

THE RECENT enactment in New York of a compulsory automobile insurance law has once more focussed attention on the recurrent arguments for and against compulsion in this field. To Australian and New Zealand lawyers, such arguments are merely of historical interest. For more than a decade, all Australian states and New Zealand have accepted compulsory insurance schemes which generally go further in providing automatic compensation for automobile accident victims than any other jurisdictions in the common-law system, except Saskatchewan. Unlike most of the legislation in the other common-law countries, compensation frequently emerges from the enactments as an end in itself, limited only by the difficulties of financing any improved system, and not by any deeply ingrained desire to retain individual responsibility in the field. The touchstone of the Australasian legislation was the New Zealand Motor Vehicles (Third Party Risks) Act of 1928.1 It was viewed by its proponents as an experimental measure, independent of any prior intrusions into the remedial area of liability.2 The Massachusetts compulsory insurance system, with its retention of a considerable area of individual responsibility, was expressly rejected as the pattern of the New Zealand Act.' In his second reading speech in the legislature, the Attorney-General, Mr. F. J. Rolleston, affirmed that the Government believed that the most effective way of dealing with automobile accidents was to provide compensation, wherever possible, for injured road users.4 The scope of the Act itself confirms that collective responsibility is admitted to be an aim in itself and not merely a palliative to satisfy uncompensated plaintiffs. The most important feature of the legislation is the extent of the compulsory indemnity requirement. All owners of motor vehicles6 are required

Conflict of Laws. Insurance. Applicability of Provision of Compulsory Automobile Insurance Statute to Accident Occurring outside State

Conflict of Laws. Insurance. Applicability of Provision of Compulsory Automobile Insurance Statute to Accident Occurring outside State

The Massachusetts Compulsory Automobile Insurance Legislation

The Massachusetts Compulsory Automobile Insurance Legislation