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Compulsory Auto/Uninsured Motorists
Virtually all states require drivers to have car liability insurance before they can legally drive a car. (Liability insurance pays the other driver’s medical, car repair and other costs when the policyholder is at fault in an auto accident.) State laws set the minimum amounts of insurance or other financial security that drivers must pay for the harm caused by their negligence if an accident occurs. The public generally supports compulsory auto insurance and wants these laws enforced.
Liability insurance is compulsory in 49 states and the District of Columbia. Only New Hampshire does not have a compulsory auto insurance liability law. Laws in most states have proven ineffective in reducing the number of drivers who are uninsured. There are many reasons for this. Some drivers can’t afford insurance and some drivers with surcharges for accidents or serious traffic violations don’t want to pay the high premiums that result from a poor driving record. With the estimated percentage of uninsured drivers in the United States close to 14 percent, it is costly to track down violators of compulsory insurance laws. And unless the odds of getting caught are high and the penalties severe, drivers will continue to flout the law.
Although more than 30 states have discussed creating online auto insurance verification systems to identify uninsured motorists, according to the Property Casualty Insurers Association of America, only four states have programs operating. These systems require insurers to maintain up-to-date databases of insured motorists that can be accessed via the Internet by law enforcement officers instantly when motorists are stopped for traffic infractions.
RECENT DEVELOPMENTS
■ In West Virginia, a bill enacted March 31, 2010 authorizes the Motor Vehicles Commissioner to develop and implement an electronic insurance verification program. (See also Background, Computer Databases). According to the Property Casualty Insurers Association of America, the bill also included stronger penalties for drivers who fail to maintain the required insurance, including suspension of drivers licenses and vehicle registrations for a first offense.
■ In Texas, where an online insurance verification system began operating in 2009, 23 percent of all vehicles did not have basic liability coverage as mandated by the state’s compulsory law. TexasSure, the verification program, reported these results as of December 2010.
■ Uninsured Motorists: A 2009 study by the Insurance Research Council (IRC) found that the estimated percentage of uninsured motorists declined nationally from 14.9 percent in 2003 to 13.8 percent in 2007. The IRC measures the number of uninsured motorists based on insurance claims, using a ratio of insurance claims made by people who were injured by uninsured drivers relative to the claims made by people who were injured by insured drivers. The study found that, as in the past, the uninsured motorist problem varies greatly from state to state. At the extremes, New Mexico had the highest uninsured motorist ratio, at 29 percent, and Massachusetts had the lowest, at 1 percent.
■ There is evidence that the current economic downturn resulted in several hundred thousand drivers dropping their insurance in 2008 as the unemployment rate climbed, according to the IRC study.
■ The IRC found that a single percentage increase in the unemployment rate is associated with an increase in the uninsured motorist rate of more than three-quarters of a percentage point. Based on unemployment rate projections at the time of the study (7.5 percent), the IRC projected that the percentage of uninsured motorists would rise from 13.8 percent in 2007 to 16.1 percent in 2010.
■ Low-cost Auto Policies: A few states with large urban populations and high car insurance premiums have created programs to encourage drivers to purchase coverage. In California low-cost policies are available to low-income drivers who meet income and good driver eligibility requirements. The program was originally set up in 1999 for drivers in Los Angeles and San Francisco counties. By the end of 2007, low-cost auto policies had become available to all drivers in the state. To be eligible, vehicles insured through the program must not exceed $20,000 in value. Another provision limits the number of low-cost policies to two per person. (See also Urban Insurance Issues.) - Used with permission of iii.org
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