Question

One of the problems with no-fault automobile insurance is that it

A) results in higher court costs.
B) results in higher jury awards to victims.
C) doesn't penalize drivers who cause accidents to the degree that they should be.
D) hasn't resulted in lower costs to insurance companies or lower auto insurance premiums.

Answer 1

No-fault automobile insurance does not penalize at-fault drivers to the degree that they should be, leading to higher costs for insurance companies and potentially higher premiums for all drivers.

Step-by-step explanation:

No-fault automobile insurance does not penalize drivers who cause accidents to the degree that they should be. This means that drivers who are at fault for accidents may not face the full consequences of their actions.

Instead, the costs of these accidents are typically borne by insurance companies, leading to higher costs for the companies and potentially higher auto insurance premiums for all drivers.

For example, suppose we have a group of 100 drivers divided into three groups based on accident severity. If all drivers pay the same premium, those with low damages end up subsidizing those with higher damages. This lack of risk classification can result in higher costs for insurance companies and higher premiums for drivers.