The Incentive Effects of No Fault Automobile Insurance

46 Pages Posted: 12 Apr 2001

See all articles by J David Cummins

J David Cummins

Temple University - Risk Management & Insurance & Actuarial Science

Mary A. Weiss

Temple University

Richard D. Phillips

Georgia State University - Risk Management & Insurance Department

Date Written: February 26, 2001

Abstract

This paper presents a theoretical and empirical analysis of the effects of no fault automobile insurance on fatal accident rates. As a mechanism for compensating the victims of automobile accidents, no fault has several important advantages over the tort system. However, by restricting access to tort, no fault may weaken incentives for careful driving, leading to higher accident rates. We conduct an empirical analysis of automobile accident fatality rates in all U.S. states over the period 1968-1994, controlling for the potential endogeneity of no fault laws. The results support the hypothesis that no fault is significantly associated with higher fatal accident rates than tort.

Keywords: No fault, insurance, fatality rates

JEL Classification: K1, K13, K3, G22

Suggested Citation

Cummins, J. David and Weiss, Mary A. and Phillips, Richard D., The Incentive Effects of No Fault Automobile Insurance (February 26, 2001). Available at SSRN: https://ssrn.com/abstract=262304 or http://dx.doi.org/10.2139/ssrn.262304

J. David Cummins (Contact Author)

Temple University - Risk Management & Insurance & Actuarial Science ( email )

Fox School of Business and Management
1801 Liacouras Walk.
Philadelphia, PA 19122
United States
215-204-8468 (Phone)
215-204-4712 (Fax)

Mary A. Weiss

Temple University ( email )

Fox School of Business and Management
1801 Liacouras Walk
Philadelphia, PA 19122
United States
215-204-1916 (Phone)

HOME PAGE: http://www.sbm.temple.edu/~rmidept/weiss.html

Richard D. Phillips

Georgia State University - Risk Management & Insurance Department ( email )

P.O. Box 4036
Atlanta, GA 30303
United States
404-413-7009 (Phone)

HOME PAGE: http://robinson.gsu.edu/profile/richard-d-phillips/

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