No-fault insurance under pressure
Around the world, there are two approaches to insurance. Where the local culture is based on an adversarial system, the injured run to the nearest court and ask a judge to decide who is the more at fault. This involves a complicated set of rules called tort, and leads to findings of negligence. Lawyers who specialize in this branch of the law tend to be wealthy. Where the approach to problem-solving is to sit down and talk sensibly, the courts are kept out of the way unless there's absolutely no other way of settling. This leads to the development of no-fault insurance. Essentially, this means that everyone has a contract of insurance and, if they suffer a loss, their own insurer pays out. It's not necessary to decide who was at fault. This means all claims are settled quickly and efficiently. It also means lawyers tend to be less wealthy.
At first, we decided we liked the law of tort and all the states used the courts to decide who was at fault in all traffic accidents. But, after a while, some lawmakers asked whether all this investment in fighting was a good use of the insurance companies' money. Surely a switch to no-fault insurance was better. That way, there would be less money spent on fighting, lower premiums and general happiness all round.
In the end, twenty-four states opted to switch to no-fault and, for a while, everything was wonderful. Premiums were lower than in the tort states and the general levels of happiness were higher. Today, only nine states remain no-fault and Minnesota has a bill that proposes repeal. Why is this?
The answer is complicated. The current situation across America is that ever more drivers are driving uninsured. This is driving up the risks and insurance premiums are rising. But the real complication comes from the increasing levels of fraud. In tort states, all disputed claims go to the courts and a judge hears the evidence. Lawyers cross-examine witnesses and look carefully at the medical evidence. It's a lot more difficult to run a scam. But in a no-fault states, the insurance companies are more inclined to pay out if the evidence presented to them looks in order. So criminal gangs now specialize in traffic accidents with multiple passengers in each vehicle. There are medical mills where fake medical reports are produced and conveniently blind lawyers prepared to push insurers to accept the highest possible settlements. Put all this together and there's certainly a need for reform if not repeal.
It's all a shame. In other parts of the world where people are more honest, no-fault insurance is strong. In our country, if people see an accident involving a bus, the witnesses run to get on before the ambulances arrive. They see the accident as an opportunity to make a few dollars. This signals the end of cheap car insurance because we all have to pay for this fraud. So, when you get your next car insurance quotes, look carefully at what's on offer and write an angry letter to your congressman. Ask for action to change the system to something that gives you protection.
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