Auto insurance premiums have fallen in states that have legalized medical marijuana, a study published in the journal Health Economics shows. Legal marijuana is often portrayed as negative when it comes to auto safety, but authors Cameron Ellis, Martin Grace, Rhet Smith, and Juan Zhang analyzed ZIP-issued insurance data from 2014 to 2019 and found that premiums fell by $22 per year on average after the legalization of medical marijuana.
Premiums fell even more in areas near dispensaries and in areas with higher rates of drunk driving before legalization. The study estimates that legalization has reduced auto accident medical costs by nearly $820 million a year, and national legalization will save an additional $350 million.
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Insurance companies set premiums based on risk factors, including your driving history, age and credit score, and location. In general, the more likely someone is to file a claim for medical expenses or accidental property damage, the higher the premiums they will have to pay. If premiums drop in an area, it’s good for insurers to view that area as less risky for motorists.
This finding is somewhat of a surprise, as previous studies have shown an increase in car crashes and deaths in states where marijuana is legal. [1]
“We didn’t expect the results we got, but we started with an open mind,” said Ellis, assistant professor of finance at the University of Iowa’s Tippie School of Business.
Ellis also points out that the latest results do not necessarily contradict previous studies, which have suggested that alcohol use stabilizes after legalization.
“Conversely, we argue that the reduction in DUI outweighs the increase in stony driving,” Ellis said.
Research shows that the increase in car safety is partly due to a decrease in drunk driving. Although they did not find any evidence that medical marijuana reduces alcohol consumption (although other studies have), [2] The authors suggest that greater availability of cannabis, which you can’t smoke in a bar, leaves more people at home to smoke and drink.
At the federal level, marijuana is still illegal, but 37 states and the District of Columbia have legalized the medicinal use of marijuana. [3] Previous studies have attempted to measure how legalization affects traffic safety by focusing on fatal crashes. The authors say this is a “significant omission”, as only a small fraction of auto accidents result in death. Instead, they obtained ZIP-level data on auto insurance companies, who end up paying most of the medical and property damage from collisions.
Ellis hopes the findings will contribute to the discussion around marijuana, as more states, including Minnesota, Kentucky and North Carolina, consider legalization.
“There are a lot of factors to consider when thinking about legalizing cannabis, and some of the positive side effects can actually outweigh the major negatives,” he said.
