The fall of no-fault insurance


The fall of no-fault insuranceThe auto insurance crisis has been rising since recent times and is spreading like wildfire right across most of the states in the US. But what seems to have caused it? Experts feel that it is the flawed no-fault insurance system that needs to be blamed.

There are a number of insurance-related issues and the root of these problems is the severely flawed no-fault system. Due to the widespread auto insurance fraud as a result of the no-fault system, a number of insurers have reduced their businesses here.

Experts state that the no-fault system in New York will soon be damaged beyond redemption if a comprehensive reform is not brought in quickly.

The no-fault insurance is being blamed for the rising PIP claims that have led to a rise in auto insurance premiums in the state of Michigan. This has made auto insurance out of bounds for most of the residents here.

Puerto Rico and twelve other states have the no-fault auto insurance laws. According to the prevailing laws, policyholders can recover financial losses that arise due to accident-related injuries from their insurers, irrespective of who was at fault at the time of the accident. Motorists also cannot claim for pain and suffering for minor injuries. They can only claim for coverage if the injuries are serious in nature and if they meet a certain criteria.

The main aim of the no-fault laws were to ensure that victims could avail prompt payment to cover medical costs where they will not be required to wait to determine who was at fault. The laws were also aimed at stopping attorneys from overcrowding the courtrooms with these smaller cases.

However, that does not seem to be the case anymore as these very laws have had unforeseen consequences. Rising medical costs, fraud, increased benefits, and the ever-increasing number of lawsuits are all leading to rising costs in auto insurance premiums in most of these no-fault states.

According to Michael Barry from the Insurance Information Institute, there are four states that have problems with the no-fault insurance. These are New York, Florida, New Jersey, and Michigan.

Motorists in these no-fault states have to purchase the PIP protection. This helps them get coverage for some of their medical costs (as well as those of fellow passengers) but only up to a permitted level. The terms of coverage and the amount varies from one state to another. This was done to basically ensure that those who don’t have health insurance can at least avail treatment.