Nation wide, 12 different states currently have no-fault auto insurance regulations in place. However, that figure could be in jeopardy as many states are considering eliminating these policies.
What is no-fault insurance?
These policies only affect accidents that involve physical injury. Instead of such an accident going to court to determine liability, the car insurance of the drivers involved will cover their medical bills, regardless of who was responsible for the accident. However, some analysts say it has led to more auto insurance fraud.
Minnesota Proposing Reform in Current No-Fault Insurance Rules
In Minnesota, three state senators recently proposed bills in hopes of changing this system, two of which would reform the current no-fault insurance rules, while the other would appeal it altogether. No-fault insurance was created to reduce the number of court cases involving auto accidents, as such cases only enter court if medical costs are greater than $4,000, if a driver experiences 60 days of disability or if a party is permanently injured or killed. However, the senators argue that the opposite is happening, with more cases reaching a judge because insurers are arguing fault.
“The medical payment part of that system is really broken,” said Mark Kulda, a spokesman for the Insurance Federation of Minnesota. “No-fault auto has no cost control whatsoever. So auto insurance pays full sticker price for medical bills, and that’s expensive, and it gets reflected in your premiums.”
In addition to the increased number of claims going to court, many insurers are also filing lawsuits for fraudulent claims. Allstate recently made such a filing against a group of doctors and seeks damages of more than $4.7 million.
New York Senators Looking to Reform No-Fault Auto Insurance
New York senators are also looking to reform the state’s no-fault auto insurance, as the increased number of fraudulent claims are “dramatically impacting the cost of auto insurance in the state and the bottom line of auto insurance companies,” stated a recent Legislative Gazette article.
“These sustained losses, because of no-fault fraud, cost State Farm $1.30 for every $1.00 in benefits provided. This is a total loss of $72.5 million for 2010,” stated Floyd Holloway, a spokesman State Farm Mutual Automobile Insurance Company.
More States Looking for Reform
In addition to Minnesota and New York, the other states affected by the review of no-fault auto insurance laws include Florida, Michigan, New Jersey, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, North Dakota and Utah. As more lawmakers propose bills that would lessen the blow to insurers for these no-fault policies, these states will need to adjust.