auto choice

Jeff Adams ( jadams@mail.state.mo.us )
Fri, 23 Jul 1999 13:33:29 -0500

Has any body seen the Rand institute study being used in the HR 1475 and
S. 837 (formerly HR2021 and S.625) motor vehicle =93auto choice=94? The
debates involve such issues as changes in costs when going from a tort
system to a no fault or =93choice=94 system to compensate victims. I have
tangentially become involved because a section at the MO Department of
insurance is looking at the issue, and showed me an =93Issue Brief=94 Fro=
m
the American Academy of Actuaries on =93Auto Choice Reform Proposals=94
summer 1998, and so for better or for worse I was contacted. The Issue
Brief which by the way makes some excellent points, was also used as a
basis for a public press release

I guess one concern with the Rand study is the analysis of the number of
people that will be compensated when you switch to a no-fault from a
tort system. First there is the issue that in a tort system if 2 people
are hurt in an accident then only the at fault driver pays. There is one
claim. In a no fault system there will be 2 claims. Furthermore, it is
my understanding that a tort system tends to discourage bad driving, so
going no fault may actually increase the number of accidents. Both
events increase the number of claims. Yet, based on what I am told, the
Rand study fails to explicitly explain how the events described above
are accounted for, if at all.

A second issue is that a tort system penalizes bad drivers, one way
presumably thru higher premiums. When going to no fault, good and bad
drivers, all other classification factors being the same, pay the same
premium. Is it possible that this impinges on classification principles
? I have not completely into this question.

Now, in the preamble of the Academy=92s brief it states =93This issue br=
ief
discusses ...potential impacts...=94. I guess the concern is should the
Academy have mentioned the issues raised above ? Probably one
consideration is what was the scope given to the AAA ? Who was there
constituency ? Are the issues a valid actuaril consideration in the
context of the bills ?

This raises a broader issue. Should there be a way for all AAA members
to have input into =93Issue Briefs=94. Perhaps they do, if so I am not
aware of it.

Finally, anybody having comments on the Rand study or any other insights
are welcome to E-mail them to me. I will forward them over to the
section working on these issues. Or if you choose, E-mail them to Brent
Kabler Statistics section at the MDI =96 bkabler@mail.state.mo.us

Thanks

Visit the CAS Web Site at http://www.casact.org
===============================================
To subscribe or unsubscribe from CASNET:
Send an e-mail to caslists@lists.casact.org
Type in the body join casnet to subscribe
or leave casnet to unsubscribe.