NO-FAULT…Where Politics & Reason Collide!

It won’t matter to those favoring no-fault regardless of facts supporting its’ repeal, but…a recent study may prove instructive for those with minds still open.

The question at hand. Whether to repeal Florida’s no-fault (PIP) law in favor of a more traditional system operating in 38 states, or; keep it, hoping recent reforms yielding a paltry 3.4%  savings won’t erode,  as they consistently have, over the last forty years. (closed minded phrasing intended).

To isolate various factors driving rates this study by financial adviser site examined average annual premiums of America’s 125 biggest cities. Note: it zeroed in on cities, not states or statewide averages as some, more widely circulated studies, have done.

Interesting that six of the top ten lowest are in the same state, North Carolina, including cities ranked the five lowest in the US. While not conclusive, it’s pertinent that North Carolina does not have a no-fault system.

Perhaps more germane is that nine of the ten cities with the lowest auto premiums are also in states that have: 1) never enacted no-fault, or; 2) repealed it after they did.

Some context. Between 1971 and 1976, two dozen states adopted various forms of no-fault. Half repealed it. The last to do so was Colorado in 2003.  By 2008 drivers there had saved 35%.  (See NOTE #1 below)

Now…to skeptics already saying “none of this really proves anything”, here’s the conclusion for cities (See NOTE #2 below) with the most expensive rates.

“All of the most expensive cities for car insurance were in states with no-fault car insurance laws.”

The problem with this study for those advocating that recent reforms should be given a chance to work is that it’s consistent–consistent with every other examination of life after no-fault.

One report by MSN concluded:

“While states grappling with costs try to repair their no-fault laws, states that have repealed them altogether have seen premiums plunge.”

A separate report by the Rand Corp. found that in Georgia, which repealed its no-fault law in 1991, liability premiums almost immediately dropped 20% and remained steady. In Connecticut, which repealed no-fault in 1994, the drop was more precipitous, with liability rates tumbling about 31% by 2004.

So, where is Florida in all this?

We’re at the place where policymakers want to keep no-fault because of a 3.4% savings on a premium that’s the highest in the land primarily because of no-fault.

It’s a place we’ve been before.

The place where politics and reason collide!


NOTE #1: 12 states and Puerto Rico have no-fault auto insurance laws. Florida, Michigan, New Jersey, New York and Pennsylvania have verbal thresholds. Seven states; Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota and Utah, use a monetary threshold. Three states have a “choice” no-fault law. In New Jersey, Pennsylvania and Kentucky, motorists may reject the lawsuit threshold and retain the right to sue.

NOTE #2: The report from NerdWallet contains the following regarding the top ten cities with the highest auto premiums; listed from highest premium to the tenth highest.

1. Detroit, Michigan–Average annual premium: $10,723.22

In Detroit, drivers face high rates because of the city’s high crime rate and Michigan’s no-fault insurance system.

2. New Orleans, Louisiana–Average annual premium: $4,309.61

New Orleans has some of the worst maintained roads in the country. Also a state law that  allows drivers to directly sue insurance companies after an accident. In Louisiana, juries only decide claims exceeding $50,000. The rest go before a judge or are settled.

3. Grand Rapids, Michigan–Average annual premium: $4,042.42

With 189,813 residents, Grand Rapids is much smaller than Detroit. However, Grand Rapids drivers still suffer from Michigan’s no-fault insurance laws and bad weather.

4. Newark, New Jersey–Average annual premium: $3,525.43

Like Michigan, New Jersey also has a no-fault insurance.  In addition to state law, Newark’s high insurance rates may result from its close proximity to New York and New Jersey’s snowy winters.

5. Baton Rouge, Louisiana–Average annual premium: $3,363.73

Louisiana’s capital is smaller than New Orleans by 130,000 residents, and drivers save nearly $1,000 yearly on their average premium. But locals endure traffic congestion and roads in disrepair, and the average cost still accounts for about 8.6 percent of the city’s median household income.

6. Hialeah, Florida–Average annual premium: $3,271.86

Hialeah drivers pay the highest premiums in Florida. One reason  is that Florida has no-fault insurance.

7. Jersey City, New Jersey–Average annual premium: $3,266.63

Nestled between Newark and New York City is Jersey City. Drivers must deal with many of the same traffic issues – notably high congestion — and often face icy winters.

8. Louisville, Kentucky–Average annual premium: $3,255.99

Although Louisville has mild winters compared to Detroit and Newark, Louisville, like all of the other cities on this list, resides in a state with no-fault car insurance laws.

9. Miami, Florida–Average annual premium: $3,168.75

Miami is in a state with no-fault insurance and it is also victim to hurricanes, but according to a few studies, Miami also seems to have bad drivers. Miami suffers from extreme congestion and was ranked as the city with the rudest drivers in the U.S. According to an Allstate study Miami has the ninth worst drivers in the U.S., meaning that they have a 58.4 percent greater-than-average accident frequency.

10. Philadelphia, Pennsylvania–Average annual premium: $2,930.53

While Philadelphia drivers deal with many factors contributing to high costs they also face Pennsylvania’s no-fault law.

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