Filed Under:Markets, Personal Lines

No Pay, No Play Has Modest Effect on Uninsured

Enactment of no pay, no play law has only a modest effect on the percentage of uninsured motorists within a state, says a study from the Insurance Research Council.

The Malvern, Pa.-based research group says it has developed a statistical model that estimates that the uninsured motorist rate can fall by as much as 1.6 percent after a state adopts a no pay, no play law.

The law prohibits uninsured drivers from collecting certain damages from negligent insured drivers, says the International Risk Management Institute. Typically, the uninsured cannot collect noneconomic damages and they are required to pay a large deductible before they can sue for property damage.

IRC says that at the present time ten states have no pay, no play laws on the books: Alaska, California, Iowa, Kansas, Louisiana, Michigan, New Jersey, North Dakota, Oklahoma and Oregon.

For states without a no pay, no play law in effect, IRC says it developed a mathematical model to estimate the compensation for noneconomic loss paid to uninsured third-party liability claimants in a given year.

Across all of the 39 states studied using 2007 data, the average noneconomic loss paid to uninsured claimants per state was $17.5 million. These findings suggest the average insured driver in 2007 paid an additional $4.69 ($5.10 in 2012 dollars) to address the average $17.5 million in noneconomic loss ($19.3 million on average in 2012 dollars) that was awarded to uninsured claimants in each state.

“The original intent of these laws was to relieve at-fault drivers who comply with state insurance requirements from having to compensate uninsured drivers for noneconomic damages. Yet, little research had been conducted analyzing the effect of no pay, no play laws on the overall insurance market,” said Elizabeth Sprinkel, senior vice president of IRC. “With this study, we now have more information on how these laws affect the population of motorists driving uninsured. This report, which also develops cost estimates for states that do not have no pay, no play laws on the books, highlights the benefits a strict law may provide to the average insured consumer.”

Copies of the study are available through the IRC’s website for $300 for an electronic version or $400 for a printed copy.

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