OLR Research Report

January 10, 2002




Jerome Harleston, Senior Attorney

You requested background information on No-Fault Automobile Insurance and deregulation of automobile insurance rates.


Under the tort liability system of compensating people injured in automobile accidents, the injured party could collect reimbursement from the one who caused his injury only if he proved that the person responsible for the accident was negligent. The legal requirement of tort law says that fault and damages must be determined as prerequisites to compensation.

The no-fault system was offered as a replacement for the tort system. It eliminates or restricts the right to sue the driver responsible for the accident. Instead, both the injured party and the driver at fault for the accident recover their losses from their own insurance companies.

Connecticut adopted a modified no-fault law in 1973. It did not impose an absolute ban on the right to sue the responsible party. It limited the right to sue to accident victims that sustain (1) death, (2) permanent injury, (3) fracture of a bone, (4) permanent significant disfigurement, (5) permanent loss of any bodily function, (6) loss of a body member, or (7) expenses in excess of $400. Accident victims with less serious injuries or minimum expenses were compensated for their economic losses from their own insurance company.

In 1994, Connecticut repealed the no-fault law. Some observers contend that the $400 monetary threshold weakened the law's effectiveness in reducing costs because it did not limit the right of accident victims to sue the at-fault party.


Automobile insurance rates in Connecticut are regulated.

Prior to 1993, Connecticut was a so-called “competitive” rating state for automobile insurance. Insurers could file and use rates without the insurance commissioner's prior approval. In 1993, the General Assembly required that rates for bodily injury liability and uninsured and underinsured motorists protection be subject to the commissioner's prior approval. The requirement was part of the automobile “reform” legislation that ended the no-fault automobile insurance system. Prior approval of rates was added to insure that the savings realized from the elimination of basic and added reparation benefits under the no-fault system were reflected in premium rates.

An unsuccessful proposal to modify prior rate approval of automobile insurance rates was introduced last year. The proposal attempts to find a middle ground between prior approval and file and use. Under it, rates would continue to be filed with the insurance commissioner but would not be subject to her approval if the rate change, together with any previously filed rate change in the prior twelve months, did not increase or decrease the insurer's rates by more than seven percent in the aggregate.

Unsuccessful proposals to deregulate rates for commercial insurance risks were also sought in the 2000 and 2001 legislative sessions.

The proposal would exempt large commercial insurance rates from the requirement to file with the insurance commissioner. “Large commercial risk” means an insured that (1) pays commercial insurance premiums of at least $25,000 in the aggregate annually; (2) employs a full-time risk manager or buys insurance through a licensed agent or consultant; and (3) either (a) generates revenue or sales in excess of $10 million annually, (b) employs more than 25 employees or 50 employees if a holding company, (c) has a net worth in excess of $25 million, or (d) is a not-for-profit or public body or agency with annual budgeted expenditures of at least $25 million.