When many parties are causally near an accident, liability law today encourages suing the deep pockets nearby, inducing too much care by deep pockets, & too little by others. Requiring all to have tort liability insurance can solve this. But law&econ my students hate this idea.
Law is the process that decides that your insurance should pay rather than their insurance.
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Instead of using law to decide how much each insurance company should pay, the insurance companies should have agreements together on how to handle these cases. How well an insurer can negotiate impacts the quality of coverage the insurer can sell.
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Then the insurance firms would also be laws, and you'd pick your law by picking your insurer. Not crazy, but a much bigger change that I was proposing.
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That sounds like one-size-fits-all monopoly insurance. Everyone wants different coverage. Depending on what they can afford and their personal risk profile. If one insurance company has bad service, customers will go to the competition.
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Requiring insurance is not the same as requiring a particular insurance provider.
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