On the road again: traffic fatalities and auto insurance minimums
Public Sector Economics
Auto insurance, Minimums, Moral hazard, Traffic fatalities
Prior research on policy-induced moral hazard effects in the auto insurance market has focused on the impact of compulsory insurance, no-fault liability, and tort liability laws on traffic fatalities. In contrast, this paper examines the moral hazard effect of a previously overlooked policy variable: minimum auto insurance coverage. We hypothesize that state-mandated auto insurance minimums may “over-insure” some drivers, lowering their incentives to drive carefully. Using a longitudinal panel of American states from 1982 to 2006, we find that policyinducedincreases in auto insurance minimums are associated with higher traffic fatality rates, ceteris paribus.
Yakovlev, P., & Orr-Magulick, C. (2018). On the road again: traffic fatalities and auto insurance minimums. Public Sector Economics, 42 (1), 46-65. https://doi.org/10.3326/PSE.42.1.3