The topic
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.
There are rare exceptions to compulsory auto insurance laws. New Hampshire does not have a compulsory insurance liability law. It requires that drivers be able to demonstrate that they are able to provide sufficient funds in the event of an “at-fault” accident. Virginia requires motorists to have insurance or register an uninsured vehicle for a significant fee. Motorcycle insurance is compulsory in every state with the exception Hawaii, Michigan, Montana, New Hampshire, and Washington. Minimum liability limits are the same for motorcycles as for private passenger vehicles (see chart below).
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 13 percent, it is costly to track down violators of compulsory insurance laws. State insurance departments and insurance companies are using new techniques to combat the uninsured motorist problem, including using electronic means to verify auto insurance quickly.
Recent developments
- Minimum Financial Responsibility Limits: Effective July 1, 2018, the minimum liability limits for auto insurance in Indiana will increase from 25/50/10 to 25/50/25. On the same date, limits in Nevada will rise from 15/30/10 to 25/50/20.
- Uninsured Motorists: In 2015, 13.0 percent of motorists, or about one in eight drivers, were uninsured, according to a 2017 study (latest data available) by the Insurance Research Council (IRC). The percentage has been rising since it hit a record low of 12.3 in 2010.
- Florida had the highest percentage of uninsured motorists, 26.7 percent, and Maine had the lowest, 4.5 percent.
- 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.
- In June 2016, the Alabama Department of Revenue reported that the uninsured motorists rate was 12.9 percent, down from 19.6 percent in 2012, when it was measured by the Insurance Research Council. Alabama implemented an online auto insurance verification system (OLV) following the passage of a law mandating the creation of an OLV in 2011.
- Insurance Verification: Two types of verification systems exist to identify uninsured motorists. One type, which relies on databases, is in use in states where 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 and chart Automobile Financial Responsibility Limits and Enforcement by State.) One type of database system is a transactional database in which insurers identify new business, cancellations and nonrenewals. Some states have passed laws to create online verifications systems (OLVs) which provide real-time information on a motorist’s insurance status. (See Background, Online Verification Systems.)
- The Texas OLV system, TexasSure, posted data showing that as of August 28, 2017 13.21 percent of all vehicles in the state were uninsured, about the same as 13.61 percent in 2016. (See Computer Databases below.)
- In April 2017 the governor of Arkansas approved the enactment of an online insurance verification system. A test phase will be implemented that would identify necessary changes during the testing phase. The law requires the establishment of an advisory group composed of representatives of the Department of Insurance, insurance companies, state police and other agencies to set up the system, test it and issue recommendations at periodic reviews. The law becomes effective on January 1, 2019.
- 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. Seventy-nine percent of auto, homeowners and renters policyholders responding to a November 2015 poll conducted by the Insurance Information Institute said they would like to view all policies available to them on a single website.
- E-Commerce Laws: According to Property Casualty Insurers Association of America (PCI), the majority of states have enacted laws that allow insurers to transmit policy documents to their customers electronically. E-delivery laws govern the transmission of all insurance documents, which include policy notices and bills. Policyholders are required to consent to these transmissions. E-posting laws concern standard property casualty forms and endorsement and do not contain personally identifiable information. Policyholders are not required to consent to these transmissions. E-card laws allow the use of electronic evidence of insurance that can be shown to law enforcement on a mobile device.
- Electronic delivery of various insurance documents has gained acceptance among many states. According to PCI, as of June 2017, 40 states and the District of Columbia allowed electronic delivery of all insurance documents and notices. In addition, the Rhode Island e-delivery law applies only to commercial lines of insurance. South Carolina's law allowing electronic delivery, enacted May 2017, will become effective January 1, 2018. Twenty-two states and the District of Columbia had enacted e-posting laws that allow policyholders to view standard policies and endorsements, which contain no personal information, through a website. Forty-six states have e-card laws or allow the use of electronic evidence of insurance on a mobile device.
