Which is a drawback of the no-fault system of compensation?

• A. The system's higher administrative costs are a disincentive to sue
• B. It guarantees quicker compensation
• C. It eliminates incentives to sue
• D. The system's lower administrative costs can be an incentive to file lawsuits

Answer: (D)

The idea being tested is how the cost and ease of processing claims influence the likelihood of people resorting to lawsuits in a no-fault compensation system.

In no-fault, benefits are paid regardless of who is at fault, and the aim is to speed up relief and reduce litigation. A drawback arises when administrative costs are low because that makes the process of pursuing a claim or even a lawsuit cheaper and less burdensome. When it costs less to file and pursue claims, some individuals may be more inclined to push for additional compensation through legal action, even within a no-fault framework. This can undermine the system’s goal of minimizing litigation by reintroducing a path to lawsuits for those seeking larger or non-no-fault remedies.

The other statements describe outcomes that either reflect benefits of no-fault (quicker compensation) or misrepresent how no-fault operates (it doesn’t completely eliminate incentives to sue).