No-Fault Insurance – Find Auto Insurance Discounts Online

How to Find Auto Insurance Discounts Online

Looking for cheap car insurance? Learn how to find auto insurance discounts online. Are you in a no-fault state? Continue reading.

In 1971, the Massachusetts Legislature passed a law that provided that the companies, in a year in which excess profits were earned, could be required by the Commissioner to set aside funds to be redistributed in the following year in the form of reduced premiums. Relying on this statute, Commissioner Ryan ordered that the companies set aside a fund equivalent to 35 per cent of the 1971 compulsory insurance premium for a possible rebate.

To quote Commissioner Ryan, “The facts tell us quite clearly that compulsory insurance rates for 1971 could have been cut at least 42 per cent rather than 15 per cent and still have been adequate, just, reasonable, and nondiscriminatory, as the law requires them to be. Rather simply, this means that the government was wrong a year ago; it could have done more in cutting rates than it did.” Unfortunately for the public, the “look back” statute is generally believed to be unconstitutional, because it requires taking from the companies monies already earned. Under principles of constitutional law, this amounts to confiscation of personal property without due process.

The motorist did receive a token premium decrease. The average premium before no-fault was $65, which, when reduced by 15 per cent for 1971, brings the total down to $55. In 1972, there was a further reduction of 27.6 per cent, bringing the average cost down to about $40 per policy. How insignificant both these decreases were is obvious when evaluating the kind of protection available from no-fault coverage.

In 1970, the fault system returned about 70 per cent of $153 million in loss payments to accident victims. This amounted to approximately $117 million. Applying the Keeton-O’Connell formula embodied in the original no-fault plan, which says that only $.44 of every premium dollar- taken in by the fault system is returned to accident victims, Massachusetts victims still would have received about $67 million in payments based on the 1970 premium.

Comparing this to what happened under no-fault, we see that, for a premium reduction of 15 per cent, Massachusetts drivers received only $2.3 in claims payments for the first nine months in 1971. Even if we speculate that every person injured in Massachusetts in automobile accidents during 1971 will receive an average of $200 per claim, the highest total payout possible would amount to $20 million. Whereas average rates were decreased by a ratio of three-to-two, benefits were taken away by a ratio of over five-to-one. To state it another way, the 42.6 per cent reduction for the years 1971 and 1972 resulted in about an 80 per cent loss in benefits.

Despite all that has happened to the advantage of the insurance industry, a further hidden increase was inflicted on the Massachusetts motoring public. Massachusetts, as we have mentioned, is divided into fifteen separate rating districts. In 1972, the towns within this rating system were rearranged. A total of 276 out of 351 towns moved into higher-paying brackets.

Some cities, such as Springfield, jumped up as many as three notches. Only eleven cities and towns were classified into lower-paying brackets. None of the cities and towns that were lowered had their rates reduced by more than one rating zone. As a result of this shifting, the 42.6 per cent reduction in the cost of personal injury coverage amounted to even less for those consumers who happened to live in a city or town that was moved to a higher rated zone.


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