The Impact of No-Fault Legislation on Automobile Insurance Premiums

Abstract

Since its inception, the effectiveness of no-fault legislation has been highly debated. While some research suggests that no-fault laws are effective in reducing costs, other evidence suggests that the current no-fault systems may not meet the original objectives. This study takes a closer look at the relation of no-fault legislation and premiums. With the sunset of Colorado’s no-fault legislation in 2003, the extension of Florida’s no-fault law to 2012, and proposed federal choice legislation, the overall impact of no-fault as well as the specific components of the laws are of heightened importance to consumers, insurers, and lawmakers.

Keywords: no-fault, automobile insurance, regulation, instrumental variables

JEL Classification: G22, G28, K23