Most people that have been buying car insurance understand that it can be expensive. Although it is required to have if you plan on driving in the United States, there are drivers that decide to drive without coverage because they simply cannot afford to pay an insurance company the rates that they are asking for basic coverage. Since insurance rates are fairly costly for the average American, there are groups that are lobbying for tort reform in order to decrease rates.
If you look at the data and statistics collected, the average price for insurance has gone up in comparison to the price of most goods. The problem is that the insurance industry has become what some consider a monopoly, but not only for auto insurance. Health insurance, homeowners insurance, life insurance, and other various genres of insurance seem to be charging steep prices for good coverage.
What is tort reform and how could it help reduce car insurance rates?
Tort reform basically refers to changes in civil law justice systems to reduce damages or litigation. The official definition refers to wrongful action done from one party to another – and is downright unethical. Whenever one party breaches contract and does wrongs to another civil party, the court system awards financial compensation to the party that has been wronged or cheated.
You probably already realize that the legal system isn’t in total alignment with fair settlements these days. If there is a bad car accident and someone files a lawsuit against another party for proper compensation, there really are no exact financial limits that a juror can award the victim. This is why it is fairly common to see accident victims collecting millions of dollars for damages through their insurance company.
If the system of tort reform were introduced into the legal system, the amount of money that the individual could be awarded would be in direct proportion to their damages. In other words, there wouldn’t be excessive claim amounts and the settlements would be fairer. Most victims of serious accidents are able to collect millions – and sometimes, these millions being collected aren’t fully justified.
How the current car insurance system works
There are some major drawbacks associated with the way that our current auto insurance system works. The major drawback is that if you are a person that caused an accident and ended up getting taken to court, you could be sued for a lot more money than without a tort system in place. So if you inflicted $50,000 in damages to another party as a result of an accident that you caused, you may end up having to pay $200,000 in a settlement to avoid court.
Although the insurance system works well for the people that are victims, most people that get sued end up having to pay significantly greater amounts of money than necessary. People are able to collect money for all sorts of damages including: psychological, medical, and being disabled. Insurance settlements are sometimes extremely high based on what you can sue for. For every big winner (in terms of finances), there is always generally a big loser with the current system in place.
What is the major advantage of tort reform for insurance?
Really the major advantage that a tort reform would offer is that it would help prevent rates from further increasing. The reason that it would prevent rates from continuing to increase is because insurance companies wouldn’t have to pay quite as much money on big ticket settlements. For example, if someone was suing for $500,000 worth of damages, the juror would do an investigation to see whether the victim actually deserves the full amount of money.
Court settlements would be a lot fairer – and based on more factual evidence than they are currently. If you were filing a lawsuit for injuries, you would have to prove those injuries in the court of law. Although you currently may have to prove injuries, the out of court settlements become inflated significantly higher than necessary in most cases where an accident victim is injured.
Major disadvantage of a tort reform system?
There are some disadvantages associated with this system as well. The primary disadvantage is that if you were an accident victim, it would be tougher to collect what you rightfully deserve. You would be more responsible for coming up with evidence and proving your case to a jury. This may be considered a disadvantage to some, but if you try to think in terms of “fairness” – this system would be awarding victims the proper amount of money instead of a large sum – regardless of whether they fully deserve it.
What do you think about tort reform and car insurance?
Although some research shows that the average person would save hundreds of dollars each year on their premiums, if you look at the facts and consider all the possibilities, it is unlikely that people would save hundreds. What is more likely is that they may save a little bit of money and/or not be subject to the trend of increased rates over time.
I personally think that the system is an interesting concept, but would require some innovative minds to make it function properly. The way that the insurance industry is currently run may seem like a monopoly to some, but in the end, they are just trying to help people stay protected while on the road. Hopefully you too realize that they are other things you can do in order to reduce your risk and save money.
In fact, one of the most common ways to save hundreds per year is by comparing rates offered by other insurers. At the top of the page, we offer a 100% no-risk, free tool, that will allow you to enter your zip code and get a free quote comparison from all of the leading insurance providers. So please check it out so that you don’t miss any savings!