We replicated the analysis described above for the dollar threshold states, compared to Michigan and New York. That is, we specified a model of the relationship between the soft-hard ratio and percent urban for the dollar threshold states, estimated its parameters, and used the estimated model to estimate the extent of excess claiming under three alternative hypotheses regarding the relationship between the soft-hard ratio and the percent urban. Table 6 presents the results for the dollar threshold states.
We estimate that 30 to 40 percent of the soft claims submitted in the dollar threshold no-fault states are excess. There are some dollar threshold states that exhibit greater excess claiming than the average tort state. And there are some tort states that exhibit less excess claiming than the average dollar threshold state. However, overall, we find less excess claiming in the dollar threshold states than in the tort states. The results presented in the estimate of the aggregate frequency of excess soft claims in the dollar threshold states is robust with respect to the underlying assumptions.
Excess claims in all states
About 73 percent of soft claims appear in the tort states. About 55 percent of the soft claims made in tort states are excess relative to the number of soft claims we would observe in these states if they all behaved like verbal threshold states.
Thus, about 33 percent of all soft claims are valid claims submitted in tort states and about 40 percent of all soft claims are excess claims submitted in tort states. The corresponding estimates for the dollar threshold states imply that the percent of soft claims are valid (excess) claims.
About 40 percent of the soft claims made in the dollar threshold states are excess relative to the number of soft claims we would observe in these states if they all behaved like verbal threshold states. Overall, about half of all soft claims in tort and dollar threshold states are in excess relative to the number of soft claims we would observe in these states if they all behaved like verbal threshold states.
CONCLUSIONS AND POLICY DIRECTIONS
The tort liability system in the United States has been widely accused of providing incentives to submit excess claims for auto injuries. Although that accusation is well known, there has been little solid empirical support to support it. This study demonstrates that the assertions are correct and provides empirically-based estimates of how much excess claiming exists. We have also demonstrated that different insurance systems modify those incentives.
Dollar threshold no-fault systems reduce the incentives to excess claims; verbal threshold no-fault systems appear to eliminate these incentives. The estimated volume of excess claiming is very large, just under 50 percent of all soft injury claims.
Last word
About 57 percent of all claims submitted by auto accident victims assert only soft injuries. The remaining 43 percent of auto injury claims involve some of her injuries. Accordingly, we estimate that about 28 percent of all claims submitted by auto accident victims are exaggerated.
