Auto Insurance Reform

Report Outline
Criticism of Automobiles Insurance System
Liability as Basis of Automobile Insurance
Pros and Cons of No-Fault Coverage Plans
Special Focus

Criticism of Automobiles Insurance System

Every year the automobile sets a number of records in the United States. The average price of a new car creeps steadily upward, as does the total number of cars on the road. Concurrently, new highs are reached in the number of motor vehicle injuries and fatalities, the cost of repairs, and the number of auto thefts. As a result of these and other factors, the cost of automobile insurance has been climbing also. Auto insurance premiums have become almost prohibitively expensive in many urban areas; more disturbing, insurance at any cost sometimes is difficult to obtain.

No one is satisfied with the way automobile insurance is handled today. Car owners complain not only about exorbitant premiums but also about cancellations or refusals to renew policies; state and federal governmental agencies question the underwriting and accounting practices of insurance companies; and the companies plead that they lose money on auto insurance.

There is widespread agreement that a new approach to automobile insurance is needed, but no consensus on what approach is best. Massachusetts, under a law that became effective Jan. 1, 1971, requires all motorists to carry “no-fault” insurance. Such coverage enables a Massachusetts driver to collect up to $2,000 in personal injury claims from his own insurer without litigation and regardless of who was responsible for the accident. In all other states, the concept of tort liability still applies. That is, the question of who was at fault in an accident must be settled before the innocent party can collect damages from the guilty party's insurance company. This fault-finding process, critics contend, is largely responsible for congestion of civil court dockets in numerous cities.