The Insurance Journal reports that no-fault insurance has become less popular as a way to keep court costs down as well as insurance premiums.
In fact, according to a study issued by the RAND Corporation, “While no-fault insurance was intended to lower the cost of compensating people involved in automobile accidents by taking most cases out of the court system, it actually increased costs because medical claims rose sharply instead”.
Source: http://www.insurancejournal.com/news/national/2010/03/02/107795.htm
No-fault insurance restricts the right to sue other drivers, receiving payments for pain and suffering or other similar damages that are non-economic and mandates that every driver be insured so that everyone involved in an accident can recover any economic losses directly from their own insurance company. It was believed that this approach would reduce costs by minimizing litigation. But because of increased medical costs these types of policies are actually proving to be more expensive.
There is apparantly a greater tendency to uses specialized medical treatment because they were more likely to be covered and there is also evidence of greater inflation of medical costs in no fault states. How this information will affect legislation in no-fault insurance states is yet to be seen.
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