An Empirical Analysis of No-Fault Insurance

Marshall H. Medoff and Joseph P. Magaddino
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Marshall H. Medoff: California State University, Long Beach
Joseph P. Magaddino: California State University, Long Beach

Evaluation Review, 1982, vol. 6, issue 3, 373-392

Abstract: A cross-sectional study of state loss experiences in 1977 were analyzed to test whether or not states that adopted no-fault automobile insurance laws experienced a reduction in deterrence. The results showed that pure no-fault states, mandatory no-fault states, and compulsory no-fault states experienced increases in their loss ratios of 7.449%, 6.308%, and 3.955%. respectively. Further analysis found that states that adopted no-fault insurance did not have significantly higher loss experiences before the adoption of such laws. Estimates of the cost savings from the adoption of no-fault insurance suggest annual benefits in the range of $28.8 million to $67 million. Employing these estimates to construct a benefit-cost ratio implies a ratio between 1.17 and 1.31. However, such estimates are subject to important qualifications and the conclusion that no-fault automobile insurance is economically efficient is tenuous, at best.

Date: 1982
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Persistent link: https://EconPapers.repec.org/RePEc:sae:evarev:v:6:y:1982:i:3:p:373-392

DOI: 10.1177/0193841X8200600302

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