Learn About No-Fault System Pros & Cons

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Compare discount car insurance quotes now. In establishing the 1972 rate, once again the mistake was made of setting the price for no-fault insurance on a fault base. No-fault must be separated entirely from the negligence claims, since, for rating purposes, they have different characteristics. This will avoid over-reserving, which led to the inflated rates of 1971 and 1972.

When passing on the 1972 rate, Commissioner Ryan predicted an increase of 20 per cent in personal injury claims over 1971, ignoring the 34 per cent drop in claims that actually took place during 1971. On the basis of the 1972 rates, the insurance industry will collect about $90 million in compulsory no-fault personal injury premiums. In view of 1971 profits, we must conclude that setting the price of compulsory premiums this high is unduly protective of the industry.
No-fault has failed the consumer on yet another score.

It has been advanced as a way of getting payments to the traffic victim very soon after his injury. That traffic victims suffer great delay before money is paid to them is widely accepted. But no-fault is running into the same difficulty. During the first nine months of 1970, the fault system was able to originate and close 26,906 cases. For the same period in 1971, no-fault was able to originate and close only 13,900 claims, or about 50 per cent fewer.

Perhaps both systems are inherently slow for reasons beyond the scope of any legislation. No-fault systems depend on reports from various independent people before payments can be made. The worst offenders in creating this kind of delay are the medical people.

Until a medical report is submitted, there is absolutely no way that the companies will undertake to establish what benefits are due. There is nothing about no-fault that will persuade the doctor to send his report in sooner. The same is also true of wage reports. Until a statement is received from an employer under either system, no evaluation can be made of wage payments owed.

These factors, the medical report and the wage confirmation, consume equal amounts of time regardless of which system is in effect.

Whereas the passage of no-fault personal injury insurance generated acrimonious debate, the Massachusetts compulsory no-fault property damage law, passed late in 1971 to place all automobile insurance on a no-fault footing, passed unobtrusively. Most likely, the trial lawyers who had bitterly opposed no-fault compulsory personal injury coverage, out of frustration, did not attempt to block the property damage reform.

According to this new law, for the first time, Massachusetts makes its automobile owners carry compulsory property damage. It is only nominally no-fault. Claims for damages to automobiles arising out of accidents with other Massachusetts motorists are barred, because, by purchasing this policy, motorists are given a complete exemption from suits against them by other drivers, regardless of fault. If two cars collide at an intersection, neither driver can sue the other for property damage. Both are forced to make claims for their damages to their own insurers.


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