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State Legislatures Favor Mandatory Insurance Minimums

Across the country, most state legislatures and their representatives favor mandatory car insurance minimums, with compulsory liability insurance laws on the books in 48 states plus the District of Columbia and Wisconsin in the process of implementing requirements voted into law in 2009. Voters tend to support legislation making liability car insurance compulsory for all drivers, though this support does not always translate to compliance. The success different states have had enforcing laws and getting drivers to comply has varied widely, with state averages for uninsured motorists ranging anywhere from 1 to 29 percent [1].

Recent Legislative Mandates on Compulsory Auto Insurance

Several states have been working to try to decrease the number of uninsured drivers out on the road through legislative means. In New York, for example, a new law is on the books requiring anyone involved in an auto accident to file a form called an NF-2 with insurance companies within 30 days of the accident occurrence. The NF-2 form has to be picked up from and then returned to insurance providers. The thought is that by requiring this sort of paperwork, more drivers will be forced into compliance with the law.

In Texas, stronger measures have been taken legislatively to promote compliance. A Texas state law allows for motorists' cars to be towed for con-compliance after one warning. In other words, as a driver in Texas, if you get caught without car insurance and you have been warned, your car can be towed on the spot. Lawmakers are even trying to put more teeth into the measure by eliminating the warning and allowing cars to be towed on the first offense.

The trouble legislators are having with the idea is the stress it might place on local police departments in Texas. Forcing them to manage all these towed cars would add another dimension to their duties. Figuring out exactly where to put them, what to do with them, and how to find space for all them and keep track of them would all increase the workload of each local police department. The hope of legislators supporting such a revision in the law is that this exact kind of job stress would cause police officers to more stringently enforce car insurance laws to reduce the number of uninsured drivers in Texas, thereby cutting down on the need for towing over time.

The state of Wisconsin joined 48 others plus the District of Columbia in making liability auto insurance mandatory as part of its annual budget package passed in 2009 and going into effect beginning in November of that year. Starting in the summer of 2010, liability insurance will be compulsory for all Wisconsin drivers under the law, though there are grumblings in the state legislature about trying to get it repealed due to the fact that it was passed as part of a larger group of bills and not considered and debated by itself. Only the state of New Hampshire has yet to make car insurance mandatory for drivers.

Limits of Laws Requiring Mandatory Insurance Minimums

State legislatures passing laws governing compulsory car insurance are nothing new. Massachusetts was the first state to do so back in 1927 [1], and over time most all states followed suit as cars became more and more common and accidents and other issues increased making the need for insurance more pronounced. But laws making car insurance mandatory and creating minimum levels of coverage have proven somewhat ineffective in reducing the number of uninsured drivers on the road.

There are multiple possible reasons for this. The number of uninsured drivers remains high in spite of general public support for these laws because some drivers simply can't afford insurance, for one thing. The costs of carrying a policy for people who have lost their jobs or who are already in over their head in debt is just too much to bear financially. It is not surprising that the percentage of uninsured motorists out on the roads increases as unemployment goes up. The typical uninsured driver is not someone who has the money to pay any damages that may be incurred in the event of an accident and thus does not feel the need to be covered; rather, many uninsured drivers are people who just do not have the money to pay for their coverage. Drivers with accidents on their records have an even more difficult time, because their insurance records rive up the cost of personal policies even more.

Another reason for the high rate of those flouting mandatory insurance minimums is the ease of skirting the system in many states. The strategy many non-compliant drivers use is to get a proof of insurance by putting down a very minimal amount of money, getting registered and then allowing the policy to expire or be cancelled due to non-payment. In many states one month's payment is enough to get a proof of insurance and get a license plate. Other drivers forego this step altogether, although they are certainly easier for police officers to spot out on the road.

The current nationwide rate of drivers on the road failing to comply with legislated minimum insurance requirements is estimated by the National Association of Insurance Commissioners to be at about 14 percent [1]; this number is expected to rise in the next year or two as unemployment climbs or holds steady in many states. More affordable insurance coverage and a better method of enforcement for non-compliance are both needed to help bring down this rate.

Challenges Ahead for State Lawmakers

Legislators at the state level certainly have their work cut out for them on the issue of the enacting and enforcement of effective legislation governing mandatory car insurance coverage. Mandatory minimums in uninsured and underinsured motorist liability insurance do work to compensate drivers involved in accidents with uninsured drivers, but they do not do much to increase compliance with the law. No-fault states have a particularly difficult challenge, with uninsured and underinsured motorist liability coverage seemingly only making coverage more expensive for those who have it and doing little to deter those who do not.

Current laws governing car insurance do not address some of the most serious issues facing insured drivers. There is little protection offered to drivers who are involved in hit-and-run accidents, accidents with drivers of stolen cars, or accidents with drivers from states with very minimal car liability insurance requirements. Getting in an accident with an unregistered car, or one in which the driver made only a single payment on a cheap insurance plan in order to get registered but then let the coverage lapse, can create all kinds of insurance headaches for the compliant drivers.

State legislatures across the country have wrestled with these questions periodically for many years, and there is no easy answer or one size fits all solution. The idea behind creating mandatory minimums for car insurance is a logical one, because getting car insurance is a choice that affects other drivers and not just yourself. The trouble lies in effective enforcement and in trying to keep car insurance affordable for more people to cut back on uninsured drivers.

[1] http://www.iii.org/media/hottopics/insurance/compulsory/ Retrieved 2009-12-1.

 

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