Can insurance schemes internalize the cost of road trafic accidents? Paper presented at the Organisation for Economic Co-operation and Development OECD Workshop B5 on automobile insurance and traffic safety, Tallinn, Estonia, May 10-12, 1995.

It has been claimed that society currently subsidises risk taking, thereby discouraging safety. Implicit in this claim is the suggestion that, by appropriately internalising the costs of accidents, the number of accidents can be reduced. This paper will present evidence relevant to this claim. The following research topics are discussed: (1) Who pays the costs of road traffic accidents? Are there significant external costs?; (2) Does the level of accident costs influence the number of accidents? It there reason to believe that raising costs, in order to internalise external costs, will reduce the number of accidents?; and (3) Is it possible to internalise the external costs of road traffic accidents by means of insurance schemes? Will such schemes be compatible with other social and political objectives? The paper is based, in large, on a paper published in Accident Analysis and Prevention in 1994 and the material referred to in that paper. (A)