Auto Insurance Companies Gamble Double or Nothing
29 Mar 2005 in Cars, Economics by GarrickThis morning, NPR reported on a study finding auto insurance rates in No-Fault states 20% higher and rising more quickly than in “Fault” states.
In a No-Fault state, each driver’s insurance pays for their claim. Elsewhere the accident-causing driver’s insurance pays for both claim.
This means insurance companies prefer the double-or-nothing gamble over having to always pay something. Rather than having an incentive to make the roads safer as a whole (No-Fault), insurance companies are betting their customers to never be at fault. The end result – a greater chance the most dangerous drivers have no insurance (no one will carry them or they can’t afford it) and a lower chance your rates will go up. Seems to me, this keeps accident rates steady.
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