Summary

No-fault auto insurance is back, 20 years after Maine rejected it. After being a failure in every state, the Auto Choice Reform Act of 1997 offers a simple no-fault insurance package: Motorists who are involved in accidents have their damages paid by their own insurance companies regardless of who is at fault.

Selling Repackaged Goods to Unsuspecting Consumers: Federal No-Fault Legislation
 
Marketing people love the concept of "repackaging." If a product fails in the market, it may not be a product problem but rather a packaging problem. A new label, some snappy advertisements, and voila, you've got a hit.

It turns out that some anti-consumer groups like repackaging too. No-fault auto insurance, a failure in every state in which it has been tried, is back - this time on a federal level. It bears a shiny new label: "the Auto Choice Reform Act of 1997." Its supporters hope that with new packaging, you won't recognize federal "Auto Choice" as the same flawed no-fault law that a large majority of states, including Maine, rejected over twenty years ago.

The sales pitch for no-fault insurance is simple enough. Motorists who are involved in accidents have their damages paid by their own insurance companies regardless of who is at fault. No messy insurance fights, no need to hold irresponsible drivers accountable for the damage they cause. Your own insurance company takes care of you so you won't need a lawyer, and everyone enjoys lower insurance premiums.

The problem is that no-fault insurance fails to deliver the goods. It certainly isn't cheaper. Several states adopted no-fault after it was first conceived in the 1960s, and the promised savings to consumers never materialized. In fact, the opposite is true - today, the four states with the highest auto insurance rates in the nation are no-fault states. From 1990 to 1996, insurance premiums for consumers rose 39% faster in no-fault states. Many of the states that experimented with no-fault later abandoned the system, and saw premiums drop as a result. In Georgia, insurance premiums dropped 6% in one year after abandoning no-fault, while rates in no-fault states increased by 7% the same year. Connecticut's experience was similar. .../...
 
A major flaw in no-fault is that it penalizes safe drivers and protects bad ones. All drivers, good and bad, pay the same premiums under no-fault, and injured motorists are prohibited from recovering from drivers who cause accidents.

Under no-fault, if you are injured by a bad driver, you can recover only from your own insurance company. If they aren't fair with you, tough luck - in addition to protecting bad drivers, no-fault limits your legal right to take your own insurance company to court. It's no wonder that voters all over the country, including in Maine, have rejected no-fault.

Now, supporters of no-fault hope to fool voters by claiming their scheme is not really no-fault because it gives consumers a choice. This "choice" is a fiction. Under the proposed national no-fault, a consumer who "chooses" to opt out of the no-fault scheme would be assessed exorbitant premiums, multiple times higher than those who "choose" no-fault. Even if a consumer pays the exorbitant premium, he still has to settle for limited no-fault recovery unless he happens to be injured by another motorist who also paid the exorbitant premium. In other words, the driver who causes the accident determines what type of compensation his victim recovers. Of course, those drivers in the highest risk categories are the least likely to pay extra premiums that would hold them legally accountable for their negligence.

Maine was smart to reject no-fault over 25 years ago. The experience of other states who have experimented with no-fault proves this. Repackaging federal no-fault legislation with a misleading new label and trying to force it on us from Washington doesn't make it any better today.