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The Incentive Effects of No-Fault Automobile Insurance

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  • Cummins, J David
  • Phillips, Richard D
  • Weiss, Mary A

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 insurance has several important advantages over the tort system. However, by restricting access to tort, no-fault may weaken incentives for careful driving and lead to higher accident rates. We conduct an empirical analysis of automobile accident fatality rates in all U.S. states over the period 1968-94, 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. Copyright 2001 by the University of Chicago.

Suggested Citation

  • Cummins, J David & Phillips, Richard D & Weiss, Mary A, 2001. "The Incentive Effects of No-Fault Automobile Insurance," Journal of Law and Economics, University of Chicago Press, vol. 44(2), pages 427-464, October.
  • Handle: RePEc:ucp:jlawec:v:44:y:2001:i:2:p:427-64
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    1. 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.
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    4. 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.
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    6. J. David Cummins & Sharon Tennyson, 1992. "Controlling Automobile Insurance Costs," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 95-115, Spring.
    7. Devlin, Rose Anne, 1990. "Some welfare implications of no-fault automobile insurance," International Review of Law and Economics, Elsevier, vol. 10(2), pages 193-205, September.
    8. Dan Schendel & Derek Channon & Ari Ginsberg & N. Venkatraman, 1992. "Abstract," Strategic Management Journal, Wiley Blackwell, vol. 13(S1), pages 37-53, June.
    9. 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.
    10. 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 415-433, June.
    11. Devlin, R.A., 1988. "Liability Versus No-Fault Automobile Insurance Regimes: An Analysis Of The Experience In Quebec," Working Papers 88126, Wilfrid Laurier University, Department of Economics.
    12. 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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    Citations

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    Cited by:

    1. Bronwyn Howell & Judy Kavanagh & Lisa Marriott, 2002. "No-Fault Public Liability Insurance: Evidence from New Zealand," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 9(2), pages 135-149.
    2. Eric A. Helland & Alexander Tabarrok, 2012. "Product Liability and Moral Hazard: Evidence from General Aviation," Journal of Law and Economics, University of Chicago Press, vol. 55(3), pages 593-630.
    3. Daniel P. Kessler & Daniel L. Rubinfeld, 2004. "Empirical Study of the Civil Justice System," NBER Working Papers 10825, National Bureau of Economic Research, Inc.
    4. 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.
    5. Vereeck, Lode & Vrolix, Klara, 2007. "The social willingness to comply with the law: The effect of social attitudes on traffic fatalities," International Review of Law and Economics, Elsevier, vol. 27(4), pages 385-408, December.
    6. Jonathan Yoder, 2008. "Liability, Regulation, and Endogenous Risk: The Incidence and Severity of Escaped Prescribed Fires in the United States," Journal of Law and Economics, University of Chicago Press, vol. 51(2), pages 297-325, May.
    7. Dionne, Georges & Michaud, Pierre-Carl & Pinquet, Jean, 2013. "A review of recent theoretical and empirical analyses of asymmetric information in road safety and automobile insurance," Research in Transportation Economics, Elsevier, vol. 43(1), pages 85-97.
    8. repec:ipf:psejou:v:42:y:2018:i:42:p:45-65 is not listed on IDEAS
    9. Joan T. Schmit & Jia-Hsing Yeh, 2003. "An Economic Analysis of Auto Compensation Systems: Choice Experiences From New Jersey and Pennsylvania," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(4), pages 601-628.
    10. Howell, Bronwyn, 2004. "Medical Misadventure and Accident Compensation in New Zealand: An Incentives-Based Analysis," Working Paper Series 3869, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    11. Steven Shavell, 2005. "Liability for Accidents," NBER Working Papers 11781, National Bureau of Economic Research, Inc.
    12. Fenn, Paul & Gray, Alastair & Rickman, Neil, 2007. "Liability, insurance and medical practice," Journal of Health Economics, Elsevier, vol. 26(5), pages 1057-1070, September.
    13. Lorilee A. Medders & Charles M. Nyce & J. Bradley Karl, 2014. "Market Implications of Public Policy Interventions: The Case of Florida's Property Insurance Market," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 17(2), pages 183-214, September.
    14. repec:bla:jrinsu:v:84:y:2017:i:2:p:691-715 is not listed on IDEAS
    15. Neri, Marcelo Cortes, 2007. "The state of the youth: prisons, drugs and car crashes," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 661, FGV/EPGE - Escola Brasileira de Economia e Finan├žas, Getulio Vargas Foundation (Brazil).
    16. Mary A. Weiss & Sharon Tennyson & Laureen Regan, 2010. "The Effects of Regulated Premium Subsidies on Insurance Costs: An Empirical Analysis of Automobile Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(3), pages 597-624.

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