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The Incentive Effects of No Fault Automobile Insurance

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Author Info
J. David Cummins
Mary A. Weiss
Richard D. Phillips

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Abstract

This paper presents a theoretical and empirical analysis of the effects of no fault automobile insurance on 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 1982-1994, 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.

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Paper provided by Wharton School Center for Financial Institutions, University of Pennsylvania in its series Center for Financial Institutions Working Papers with number 99-38.

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Date of creation: Aug 1999
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Handle: RePEc:wop:pennin:99-38

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Farrell, Phillip & Fuchs, Victor R. & Fuchs, Victor R., 1982. "Schooling and health : The cigarette connection," Journal of Health Economics, Elsevier, vol. 1(3), pages 217-230, December. [Downloadable!] (restricted)
  2. Ian Mcewin, R., 1989. "No-fault and road accidents: Some Australasian evidence," International Review of Law and Economics, Elsevier, vol. 9(1), pages 13-24, June. [Downloadable!] (restricted)
  3. Lee, Lung-Fei, 1978. "Unionism and Wage Rates: A Simultaneous Equations Model with Qualitative and Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 415-33, June. [Downloadable!] (restricted)
  4. Landes, Elisabeth M, 1982. "Insurance, Liability, and Accidents: A Theoretical and Empirical Investigation of the Effect of No-Fault Accidents," Journal of Law & Economics, University of Chicago Press, vol. 25(1), pages 49-65, April.
  5. Lave, Charles A, 1985. "Speeding, Coordination, and the 55 MPH Limit," American Economic Review, American Economic Association, vol. 75(5), pages 1159-64, December. [Downloadable!] (restricted)
  6. Cummins, J David & Tennyson, Sharon, 1996. "Moral Hazard in Insurance Claiming: Evidence from Automobile Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(1), pages 29-50, January.
  7. Robinson, Chris, 1989. "The Joint Determination of Union Status and Union Wage Effects: Some Tests of Alternative Models," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 639-67, June. [Downloadable!] (restricted)
  8. Cummins, J David & Tennyson, Sharon, 1992. "Controlling Automobile Insurance Costs," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 95-115, Spring. [Downloadable!] (restricted)
  9. Peltzman, Sam, 1975. "The Effects of Automobile Safety Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 677-725, August. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Steven Shavell, 2005. "Liability for Accidents," NBER Working Papers 11781, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Alma Cohen & Rajeev Dehejia, 2003. "The Effect of Automobile Insurance and Accident Liability Laws in Traffic Fatalities," NBER Working Papers 9602, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Neri, Marcelo Cortes, 2007. "The State of the Youth: Prisons, Drugs and Car Crashes," Economics Working Papers (Ensaios Economicos da EPGE) 661, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
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