< Critics say that no-fault is a form of compulsory health insurance and reduces drivers’ incentives to drive carefully (thereby increasing accidents and premium costs). < Financial responsibility laws induce motorists to buy auto liability insurance so that victims of their negligence will be compensated. < State legislatures set minimum limits that must be carried in auto liability insurance. < Unsatisfied judgment funds assist injured motorists who cannot collect from financially irresponsible liable parties. D I S C U S S I O N Q U E S T I O N S 1.Discuss the forms of automobile no-fault laws presented in this chapter. 2.What are the advantages and disadvantages of no-fault laws presented in this chapter? 3.Explain the difference between a monetary threshold and a verbal threshold for no-fault laws. 4.What is the purpose of financial responsibility laws? 5.Automobile financial responsibility laws require you to have some minimum amount of auto liabilityinsurance. If the purpose of liability insurance is to protect you from loss caused by your negligence, whyshould the law force you to buy it? Do you think this is a decision for you to make? Explain.
3. ENSURING AUTO INSURANCE AVAILABILITY L E A R N I N G O B J E C T I V E S In this section we elaborate on the residual or shared market for auto liability insurance, including the following: < Auto insurance plans < Reinsurance facilities < Joint underwriting associations (JUAs) < The Maryland State Fund The assumption underlying laws requiring motorists to buy automobile liability insurance is that it is available. Unfortunately, some drivers cannot buy insurance through the usual channels because, as a group, their losses are excessive. As a result, people injured by such drivers might not be able to collect anything for their losses. Presumably, this problem can be solved by charging higher premium rates for such drivers, as is the case of insurers providing coverage to the so-called substandard market , in which some companies offer limited auto coverage to high-risk drivers at high premium rates. These insurers can do so because of the availability of computerized systems permitting them to calculate the rates for smaller groups of insureds.
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