No-fault auto insurance is a bad deal for consumers. It takes away rights, yet doesn't reduce costs.
Even when the no-fault plans eliminate full compensation for seriously injured people, the premiums don't go down. And whether subject to no-fault or not, consumers are still often forced to fight their own insurance companies for such benefits as lost wages and medical expenses - benefits for which they've already paid.But despite these facts, insurance companies continue to promote the same kind of ineffective no-fault plans that have failed this nation's consumers for nearly 20 years.
A few critical facts:
- No-fault eliminates consumers' rights. No-fault places a heavy burden on the consumer - the sole participant in the auto-insurance system who can be readily identified and easily defeated.
The no-fault system typically does this by eliminating the consumer's right to fair compensation for pain and suffering. Preserving this right provides crucial protection at the very times when it's most needed, when the most serious accidents occur and the victim has often suffered grievous injury.
But two decades of experience have clearly demonstrated that even when consumers in no-fault states lose this right, such other problems as medical and property damage costs continue to produce high premiums. The consumer loses - but still pays.
- No-fault doesn't reduce insurance premiums. Massachusetts launched no-fault in 1971. It was the first state in the United States to do so. But by 1988, the most recent year for which complete figures are available, Massachusetts had the highest average auto rates in the country.
Auto-insurance premiums are determined by several factors, including drivers' ZIP codes. In large part, where we live determines how much we pay.
No-fault doesn't change that practice, nor does it eliminate the many other factors in the insurance cost equation: insurance fraud; high property damage costs; poorly managed plans for the riskiest drivers; auto theft and the chop-shop industry; and medical costs that exceed general price increases.
- No-fault frequently duplicates existing insurance. Under most no-fault plans, the consumer is entitled to automatic medical and wage loss benefits. But is it necessary for all consumers to pay for these benefits - especially when most employed drivers already have them? Since benefits are most frequently paid from these "primary" policies, the no-fault auto-insurance company is essentially charging for benefits that it may never have to provide. The consumer pays twice - and is reimbursed once. Yet two insurance companies collect premiums.
No-fault encourages bad driving. No-fault allows compensation for drunk drivers, people who are involved in single-car accidents and those clearly at fault. It provides less incentive to drive safely. Negligent drivers can continue wrecking cars, knowing that their insurance will pay for the damage - and that safe drivers will be billed for the difference.
The public has rejected no-fault. Only three states have true no-fault because the decisionmakers know that no-fault has failed.
The apparent message of the voters is that they don't believe insurance industry claims that, if they give up part of their right to compensation, they will receive lower insurance rates. That's because such rates have never materialized in any state that has tried no-fault.
America's citizens don't buy the pitch for no-fault. And for excellent reasons.