Compulsory Auto/Uninsured Motorists
Virtually all states require drivers to have auto liability insurance before they can legally drive a motor vehicle. (Liability insurance pays the other driver’s medical, vehicle repair and other costs when the policyholder is at fault in an 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. New Hampshire, the only state that does not have a compulsory insurance liability law, requires that drivers be able to demonstrate that they are able to provide sufficient funds in the event of an “at-fault” accident. Motorcycle insurance is compulsory in every state with the exception of four: Hawaii, Montana, New Hampshire, and Washington.
Laws in most states have proven ineffective in reducing the number of drivers who are uninsured. There are many reasons for this. Some drivers cannot afford insurance and some drivers with surcharges for accidents or serious traffic violations do not 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.
- Electronic Insurance Verification: Insurer verification laws mandate that all insurance companies in a state submit the entire list of their policyholders to an outside vendor or a state agency, which matches them to motor vehicle registrations. (See Background, Computer Databases.) In Mississippi, where the system was scheduled to be operational in 2013, the department of insurance has not yet selected a data contractor and its implementation date is pending. West Virginia’s system was expected to be fully operational in January 2014, and Utah began a two-year web services pilot program in early 2013.
- The Texas online insurance verification system, TexasSure, posted data showing that as of March 3, 2014, 13.28 percent of all vehicles in the state were uninsured, compared with 14.21 percent on March 4, 2013. (See Computer Databases below.)
- Electronic Proof of Insurance Coverage: According to the Property Casualty Insurers Association of America (PCI) reports, as of June 2014 about 40 states had approved laws, known as e-card laws, allowing motorists to use smartphones to show proof of insurance coverage electronically, instead of using traditional paper insurance cards. Electronic proof of insurance saves insurers the cost of printing and mailing ID cards to policyholders.
- Electronic Delivery: According to PCI reports, as of June 2014 about 20 states allow electronic delivery of insurance documents and notices. These laws are known as E-Commerce laws.
- Website Access: Access to insurance policies online could aid people who are evacuated or suffer a loss following a natural catastrophe, as well as allow policyholders to review their policies at any time using smartphones or tablets. Sixty-six percent of auto, homeowners and renters policyholders responding to a May 2014 poll conducted by the Insurance Information Institute said they would like to view all policies available to them on a single website.
- By the end of 2013, 13 states (Alaska, Arizona, Florida, Illinois, Kansas, Michigan, Minnesota, Missouri, Oklahoma, Pennsylvania, Texas, Virginia and Wisconsin) had approved laws that will allow policyholders to access their insurance policies through a website, according to PCI.
- Uninsured Motorists: The percentage of uninsured motorists declined nationally from 14.9 percent in 2003 to 13.8 percent in 2007, according to Insurance Research Council (IRC) estimates reported in its 2011 study. The percentage rose to 14.3 percent in 2008, but fell back to 13.8 percent in 2009. 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, Mississippi had the highest uninsured motorist ratio, at 28 percent, and Massachusetts had the lowest, at 4.5 percent.
- In its 2008 report, the IRC documented a strong historical correlation between the national unemployment rate and the uninsured motorist rate. In the 2011 study, the IRC notes that the strength of this historical relationship has diminished.
- Minimum Financial Responsibility Limits: In August 2013 a bill was approved in Illinois that raises the minimum financial responsibility limits for auto insurance policies from 20/40/15 to 25/50/20, effective January 1, 2015. The first number refers to bodily injury (BI) liability limits for one person injured in an accident (limited to $25,000), the second number refers to BI liability limits for all persons injured in an accident and the third number to property damage (PD) liability.
- Undocumented Immigrants Drivers Licenses: In California a law that will allow undocumented immigrants who are state residents to obtain a drivers license after they have passed driving exams will become effective on January 1, 2015. (See Background, Undocumented Immigrants Drivers Licenses.)
AUTOMOBILE FINANCIAL RESPONSIBILITY LIMITS AND ENFORCEMENT BY STATE
The chart above provides a state-by-state overview of minimum auto liability limits and the insurance required by state law. Coverages that may be rejected by the policyholder, either in writing or verbally (i.e., are not mandatory) have been excluded.
States may also require motorists to have physical proof of valid insurance, which is usually a card issued by the insurer. They may also require motorists to provide evidence of insurance in certain situations. For example, all but about a dozen states require motorists to have valid evidence of insurance in their vehicles at all times and to produce it when stopped by law enforcers. About the same number of states require motorists to produce evidence of insurance when they are involved in a crash or shortly afterward. About half of the states require evidence of insurance when a vehicle is registered.
Increasingly, laws are being passed that expand the role of the insurer in verifying compliance with compulsory liability laws and aiding in their enforcement. Insurance companies often work in conjunction with state motor vehicle departments to verify insurance coverage. Most states have laws that specify that insurers must notify the motor vehicle department when a policy is cancelled or not renewed. In some states, insurers are asked to verify the existence of insurance at the time that a specific accident occurred. In other states, insurers are given lists of randomly selected auto registrations, which they are asked to match up with insurance policies that the motorists claim were in effect. Newer laws, known as computer data laws, require an insurer to submit its entire list of automobile liability policies, updated at specified intervals, to a state agency such as the motor vehicle department. The state agency can use the lists to verify registration applicants' declarations that insurance is in effect. (See also Background: Computer Databases.)
Penalties for driving without compulsory insurance include fines, which can be as high as $5,000 for a subsequent offense, to license or registration suspension or revocation. Some states can impose jail time, confiscate license plates and impound vehicles.
Undocumented Immigrant Drivers Licenses: Proponents in favor of granting undocumented immigrants drivers licenses say that the requirement would promote safety and responsibility by ensuring drivers have passed a driving exam and have insurance, as is generally required for licenses, and would ensure that more complete data is available to officials checking drivers license data bases for information on an individual driver, such as place of residence or driving record. Opponents say the licenses create a security risk by potentially providing illegal immigrants with ease of access to secure buildings and other privileges.
As of April 2014 at least eight states and the District of Columbia had laws granting driving privileges to undocumented drivers. Washington and New Mexico allow undocumented immigrants to obtain drivers licenses, while Utah allows undocumented immigrants to obtain learners permits. Nevada issues Driver Authorization Cards instead of licenses. Illinois’ law allows undocumented immigrants who have resided in the state for over a year to obtain a temporary drivers license. Provisions in the law would make the license invalid if the driver cannot show proof of insurance if stopped by a law enforcement officer. Maryland’s law allows for a “second tier” drivers license for applicants who cannot prove lawful status if the applicant has filed a Maryland tax return or is claimed as a dependent by a person who has filed a tax return in the state. These licenses will expire on July 1, 2015. In Vermont the Department of Motor Vehicles issues operator and junior operator privilege cards and learners privilege cards to applicants who cannot establish lawful presence or otherwise fail to satisfy identity requirements, if they can furnish reliable proof of address, among other requirements. Oregon’s law has been contested and will be decided as a referendum in November 2014.
Laws granting driving privileges to undocumented immigrants will go into effect in August 2014 in Colorado and Puerto Rico. In California, where a law goes into effect on January 1, 2015, applicants must be able to prove their identity, be state residents and pass driving exams. The licenses will be marked with a special notice stating that it is not an official identification document and cannot be used for any other purpose. Connecticut’s law also goes into effect on January 1, 2015.
Tennessee has reportedly repealed its program, citing fraud problems, and the governor of New Mexico has said she will work to do the same (see research below.)
The North Carolina Division of Motor Vehicles said that on March 25 it would begin to issue specially marked drivers licenses to undocumented immigrants who were brought to the United States as children. The licenses are a response to the federal Deferred Actions for Childhood Arrivals Act, which provides a pathway to citizenship for these individuals. An attorney with the National Immigration Law Center said that about 40 states and the District of Columbia plan to issue similar licenses.
Researchers from New Mexico State University and Duquesne University found that New Mexico’s law allowing undocumented immigrants to drive has failed to cause a significant change in the percentage of uninsured motorists in the state. When New Mexico began issuing drivers licenses to undocumented immigrants in 2003, 26.3 percent of drivers were uninsured. In 2008 the ratio increased to 29.5 percent before dropping back to 25.7 percent in 2009. The report, Examining the Impact of Issuing Driver’s Licenses to Undocumented Immigrants and Other Socioeconomic Factors on the Percentage of Uninsured Motorists, is based on data from the Insurance Research Council. It appeared in the Journal of Insurance Regulation in 2011.
ESTIMATED PERCENTAGE OF UNINSURED MOTORISTS BY STATE, 2009 (1)
UNINSURED MOTORISTS, 1990-2009 (1)
TOP TEN HIGHEST AND LOWEST STATES BASED ON ESTIMATED PERCENTAGE OF UNINSURED MOTORISTS, 2009 (1)
KEY SOURCES OF ADDITIONAL INFORMATION
Allstate. Auto Insurance State Coverage Map. Includes information on required limits and common limits, by state.
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