No-Fault Coverage May Mean Higher Rates

Car insurance is one area where individuals have seen savings as of late, largely thanks to a system adopted some time ago known as the tort system. Under this system of insurance, each driver’s insurance company is responsible for paying only a portion of the costs associated with a car accident, including mechanical repair bills, medical expenses, and even lost wages.

The degree of liability that each driver should be held to for the accident is typically decided in a civil court that looks at different forms of evidence before making such a conclusion. No fault insurance, on the other hand, represents another system of insuring entirely, one that makes a major tradeoff in the form of coverage versus cost. Why discuss the difference between these systems? Because, no fault insurance is on its way back in some states and this could have major impact upon those individuals who already suffer from high car insurance bills.

With no fault insurance, drivers needn’t go to civil court to determine who is at fault in an accident. Instead, each driver is fully covered (according to his or her policy) by his or her own insurer, regardless of who is responsible for the collision. Obviously, this allows for a much more streamlined system that enables more rapid release of funds to desperate drivers as well as less strain on the courts. However, it comes at a real cost. Drivers in states that utilize no fault insurance systems pay on average 400 dollars more each year.

Those who argue for the superiority of the no fault system of insurance point to the medical system for justification. Under no fault systems of insurance, as much as 60 percent of medical expenses are covered by insurance companies. Under tort systems, however, this figure has been known to fall as low as 23 percent. The result is that state hospitals and emergency rooms suffer a severe increase in unpaid funds, in some states racking up debt as high as 60 million dollars.

With healthcare being as important a concern among lawmakers at this point in time as insurance policies, this discrepancy between the two forms of insurance simply cannot be ignored. In addition, lawmakers state that a change to no cost insurance would ultimately benefit drivers as their eventual burden in the form of medical expenses would be sharply reduced. There is even some thought that this relief would extend to taxpayers who would no longer have to make up the slack for underfunded hospitals.

However, no fault insurance is obviously not without its critics. Many assert that asking individuals to pay more for insurance during this time of economic hardship is foolish and irresponsible. They also state that absolving drivers from the burden of accountability in accidents is likely to foster unsafe driving practices as young and inexperienced drivers begin to feel it doesn’t matter if they have minor collisions, as insurance companies will pay for the damages regardless of who was at fault. Granted, this trend is not proven or backed up with evidential studies at the current time, but it does express a real concern: the long term effects of no fault insurance on a population have yet to be measured.