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An Empirical Analysis of No-Fault Insurance

Author

Listed:
  • Marshall H. Medoff

    (California State University, Long Beach)

  • Joseph P. Magaddino

    (California State University, Long Beach)

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.

Suggested Citation

  • Marshall H. Medoff & Joseph P. Magaddino, 1982. "An Empirical Analysis of No-Fault Insurance," Evaluation Review, , vol. 6(3), pages 373-392, June.
    • Handle: RePEc:sae:evarev:v:6:y:1982:i:3:p:373-392
    DOI: 10.1177/0193841X8200600302
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    References listed on IDEAS

    as
    1. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    2. Ippolito, Richard A, 1979. "The Effects of Price Regulation in the Automobile Insurance Industry," Journal of Law and Economics, University of Chicago Press, vol. 22(1), pages 55-89, April.
    3. Peltzman, Sam, 1975. "The Effects of Automobile Safety Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 677-725, August.
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    Cited by:

    1. Cohen, Alma & Dehejia, Rajeev, 2004. "The Effect of Automobile Insurance and Accident Liability Laws on Traffic Fatalities," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 357-393, October.

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