Choice No-Fault: Actuarial Costing Methods

Choice no-fault plans are popular options with state legislatures considering reforms to the private passenger automobile insurance system. Such plans offer the insured an opportunity to choose the level of coverage needed not only for first part injuries, but also for third party liability. Such plans are generally part of broader reform measurers, which often include medical fee schedules, utilization or peer review of medical costs, anti-fraud provisions, limitations on the right of recovery under tort for drivers without financial responsibility and optional residual liability coverage. This paper will focus on the issues and mechanics involved in deriving reasonable cost estimates for choice no-fault plans and other such reform measures, and describe considerations the actuary should address in such costing exercises. LOB-Auto Liability