How No Fault Auto Insurance Works
The aim and intent of a no fault auto insurance policy is to provide a minimum amount of medical coverage for motorists and passengers who are involved in automobile accidents. However, many unscrupulous individuals continue to perpetrate instances of fraud and abuse. This form of coverage restricts one's ability to sue another motorist for damages or medical related injuries she or he may sustain in accident.
Only in extreme cases of detrimental harm may a lawsuit be filed. In theory, these limitations on litigation are supposed to reduce the cost on automobile insurance for motorists because the insurance company is not being bogged down in costly court battles. However, this system is not necessarily achieving its aim. Because no one motorist is considered at fault in an accident, there is no personal recrimination for the individual who is at fault in the accident. Rather, the insurance rates of all parties involved rise because of the claims that are filed. Litigation costs are, in actuality, not reduced because an individual still possesses the ability to sue another motorist or insurance company in the event of an accident. Many industry experts believe that the problem of increasingly high insurance rates can only be resolved by repealing existing laws and instituting rate regulation laws.
Recent surveys have indicated that six of ten states with the highest insurance premium increases in 2002 were states that held no fault policies when it comes to determining who was at fault in an accident. Furthermore, insurance premiums are approximately 19% higher in no fault states than in personal responsibility states. With the recent economic downturn, many individuals and household cannot afford ever increasing insurance premiums. This serves as a potential risk for an increased number of motorists driving without proper insurance coverage. This survey also indicated that over 70% of current motorists believe that a major amount of reform is needed in the car insurance industry. While the intent of the no fault system is to prevent common abuses of the court system, it is clearly not working. States that have repealed their laws concerning no fault policies have seen lowered instances of system abuse and a decrease in the rates of insurance premiums.
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