Raising Compulsory Automobile Insurance Minimum Amounts: A Case Study from the United States

Abstract

This article discusses a decision both European Union Member States and states in the United States must make: whether to raise their compulsory automobile insurance minimum amounts. The authors review a case study from the United States, the Commonwealth of Pennsylvania, and conclude a proposed increase in the compulsory minimum amounts should pass the legislator. The purpose of compulsory automobile insurance is to compensate victims of automobile accidents. Due to inflation, the minimum amounts in Pennsylvania no longer compensate adequately. Moreover, the data do not support the contention that an increase in the minimum amounts will cause large increases in premiums and uninsured rates. The authors conclude that compulsory minimum amounts should be periodically reviewed, as they are in the European Union, and that arguments about large increases in premiums and uninsured rates should be subjected to a careful review based on data.