June 2, 2006 By Andy Opsahl
It's a horrible day, but thank goodness it wasn't your fault. Then you find out the other driver doesn't have insurance. Assuming you don't pay extra for uninsured motorist coverage, a pricey medical bill or faint hope from some ambulance chaser awaits you.
Georgia is one of several states reducing its uninsured motorist claims by implementing insurance compliance databases requiring insurance companies to report when a motorist starts or cancels a policy. The databases also enable police to electronically check a driver's insurance status in real time.
Satisfaction with these systems varies.
Georgia boasts of success -- the uninsured motorist rate was cut from 20 percent to 2 percent in less than two years -- while Colorado legislators want to terminate the contract with the state's uninsured database vendor.
Catching Uninsured Drivers
Before Georgia's Electronic Insurance Compliance System (EICS), the state had no effective method of tracking uninsured drivers, said Keith Thomas, IT section manager for the Georgia Department of Revenue (DOR).
Insurance information was self-declared, meaning a motorist only had to show an insurance card at registration time -- a card easily faked, according to Thomas.
"Right before [the driver's] tags were about to be renewed, they would go and get an insurance policy, get a legitimate card, renew their tags, and then after they got their tags, they'd cancel the policy," Thomas said. "They're going to drive around with that card because the card has a six-month expiration date on it. To law enforcement and the county tag officers, it looks like a legit card."
Georgia implemented its EICS in 2001 by expanding the state's car registration tag and title database to include every registered driver's insurance status.
The state requires all insurance providers covering Georgia motorists to report every policy enrollment and cancellation to the DOR. Each insurance company has a folder on one of the state's servers, which it can access to transfer latest batches of new policies and cancellations, each including the driver's vehicle identification number (VIN).
The department receives roughly 40,000 updates every night, according to Thomas. Department staff members enter the information into the tag and title mainframe, and match it with the correct VINs. If after 30 days, the system finds a motorist having a cancellation entry without a new policy enrollment, a letter threatening an $85 fine is issued along with a deadline for insurance reinstatement within the next 30 days.
On the second warning, the DOR slaps the driver with another $85 fine and a mandatory 90-day registration suspension.
"If you tell somebody they can't drive their car for 90 days, you can imagine how those people feel," Thomas said. "The third time, it's actually six months. They're harsh penalties."
Thomas said he thought lawmakers would likely eliminate the driving suspensions and raise the financial penalties. The current fines may not seem substantial, given the financial damage an uninsured driver could inflict on other drivers, but Thomas points out that $85 and $170 are hefty sums for those who can't afford auto insurance.
Many insurance companies loathe EICS laws because of the enormous financial and administrative responsibility the laws impose on them.
"Just to establish the systems that would comply with the New York [EICS] law cost insurance companies tens of millions of dollars," said David Snyder, vice president and assistant general counsel of the American Insurance Association (AIA). "For at least one AIA company, 40 percent of its IT resources during nonregular business hours are consumed by these poorly designed insurance-verification systems."
Snyder said most states using an EICS operate it on antiquated legacy systems, and insurance companies are forced to jump through costly technical hoops