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No More Hiding

States use databases to pinpoint uninsured drivers and enforce auto insurance laws.

Imagine a multitasking driver slams into your vehicle on Route 5, breaking your leg.

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.


Industry Disdain
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 to make their equipment interface with those old systems.

"Consumers ultimately pay for wasteful systems, in terms of taxes and insurance premiums," Snyder said. "They're also costly to consumers, both businesses and individuals, when they have to waste time to verify insurance that they already have, or worse yet, in the case of businesses, have their vehicles pulled off the road and maybe even lose valuable cargo or customers over the inability to deliver on time.

"We have serious questions about the whole underlying concept here, because it converts insurance companies into being police officers and off-loads responsibility," Snyder said.


Industry Alternative
After years of fighting state insurance compliance databases and losing, the industry is offering an alternative.

"If you're going to [track uninsured drivers], do it in the most cost-effective way," Snyder said, adding that states should remove the tens of millions of drivers who have insurance from the system and focus only on those who don't have insurance.

"Because of its flaws, [the usual system] really impinges on honest, law-abiding citizens," Snyder said.

The AIA recommends a system that would be kept within insurance companies, which state officials or police could query to verify a motorist's insurance.

"A DMV agent at the customer service desk would be given an ID card by the person who comes in to register a vehicle or license it, and using a key on that ID card, the person at the customer service window could query the insurance company, and the insurance company could confirm coverage immediately, probably in less than five seconds," Snyder said.

Snyder said the system would be totally automated and drastically alleviate insurance companies' burdens by allowing them to streamline all of their data on one, cutting-edge, over-the-counter solution. It would also render fabricated or inactive insurance cards useless to motorists at registration time or when pulled over by police.

Using this new system, however, the state would lose its ability to know exactly which registered drivers are insured or uninsured at all times. Snyder said the reality is that states don't have accurate information. He cited habitual mismatches and delays between policy renewals and cancellations as the attributing factors for errors.

Snyder said Florida is showing interest in the AIA's preferred model, and the organization also sees Wyoming and Oklahoma as likely candidates for the alternative.


Working out the Bugs
Georgia managed to fix problems with its EICS project in an early stage. The Legislature began debating whether to implement an EICS in 1996 and didn't pass legislation authorizing the EICS until 2001.

The state established the Department of Motor Vehicle Safety (DMVS) to handle several related functions, which included the EICS.

"We did it all ourselves with internal resources. It was an unfunded mandate," Thomas said.

After the EICS began, it found 1.7 million uninsured drivers out of nearly 7 million registered motorists, partially because insurance companies often submitted VINs that didn't match correctly with their clients' VINs in the tag and title database.

"When a VIN is read off the dashboard of a vehicle by the owner, given to an insurance agent, who then sends it to the insurance underwriter and on to the insurance companies -- there's a lot of room for mistakes in that VIN," Thomas said.

He said the DMVS halted the program until 2004, allowing lawmakers to rephrase the legislation to require 100 percent correct VINs in the system. The extra time gave motorists and insurance companies a grace period to acclimate to the new law.

By 2005, Georgia Gov. Sonny Perdue dismantled the DMVS and renamed it the Department of Driver Services to narrow its focus to issuing drivers' licenses. The EICS was moved to the DOR.

For the most part, since 2004, Georgia's EICS has kept mismatches at a reasonable level, according to Julie Pulliam, regional spokeswoman for AIA. However, the organization wants Georgia to switch to its recommended system.

"Georgia is smoother, but frankly we still have problems with Georgia, and we think this new system is better than the Georgia system," Snyder said.


Colorado Conflict
Colorado implemented an uninsured motorist database in 1999 that is currently under sunset review in the state Legislature. Rep. Dorothy Butcher recently introduced a bill to eliminate the database, as it exists.

"When we got the report from not only the contractor who owns the system that keeps that database, but from the insurance industry and also from the staff themselves, the data was incomplete, incorrect and not timely," Butcher said. "Based on that, I said, 'Well, you know, we've spent $13 million on this, and you're asking for another million now. How is it that we want to continue this program if the data that you have is incomplete, not current and inactive?'

"The longer we listened to it, the worse it got, so I just said, 'You know, we're not doing this anymore.' We'll figure out how we can bring this program in-house, save money and [have the data in] a one-stop shop," Butcher said.

The Colorado Department of Motor Vehicles (DMV) wants to take over the insurance compliance database, saying it can make the program more efficient and cost-effective. The passage or defeat of Butcher's legislation will determine the transition's timetable.

The vendor, Explorer Information Services, claims it reduced Colorado's rate of uninsured motorists from 33 percent in 1999 to 11.5 percent in 2006, according to Carole Walker, executive director of the Rocky Mountain Insurance Information Association (RMIIA).

"The insurance industry felt as though those numbers were closer to somewhere between 18 percent and 20 percent [in 1999]," Walker said.

She said despite the decrease in uninsured drivers, insurance companies' reports do not correlate with uninsured motorist claims, implying that there has been no reduction in accidents caused by uninsured drivers.

Walker said a better way to get more motorists insured is to enact policies that reduce the cost of insurance. Colorado recently abolished its "no fault" insurance law. The law forced all drivers to pay their own medical bills from traffic accidents, regardless of who caused them.

The policy saddled Colorado drivers with soaring personal injury protection coverage costs. In the 18 months since Colorado ended the no fault policy, rates have decreased by between 19.5 percent and 27.1 percent, according to a consumer rate example survey, conducted by the RMIIA and the Casualty Insurers of America.

Snyder said the AIA is waiting for Colorado to dismantle its current uninsured database before lobbying the state's DMV to adopt the AIA's preferred model.

In the meantime, uninsured-motorist databases appear to be a growing trend in state governments, and widespread adoption could accelerate when systems with a low rate of false matches become the norm.
Andy Opsahl is a former staff writer and features editor for Government Technology magazine.