Online verification helps Alabama identify uninsured drivers

May 23, 2018 / 4 min read

In 2013, Alabama launched an electronic DMV automobile liability program, with the goal of reducing its population of uninsured motorists. The state is now seeing results from the initiative that put it closer to the goal.

Numbers don’t lie

The numbers tell the story. In 2007, the Insurance Research Council estimated 26 percent of Alabama motorists were uninsured. In 2015, the number dropped to 18.4 percent; and more recently, state officials estimated the percentage is now close to 12 percent.

Alabama CV-ALIR

How has Alabama managed to cut its uninsured motorist rate by more than half in ten years? By introducing more proofs of insurance, improving error avoidance, and implementing real-time online verifications with frequent book of business uploads from insurers.

The effort was aimed at taming a process fraught with difficulty. The data aspect, especially collection and maintenance of vehicle identification number (VIN) lists by states or insurers, is highly susceptible to keystroke or customer communication errors, as noted in a recent report by the Insurance Industry Committee on Motor Vehicle Administration (IICMVA).¹ Inconsistencies in customer information, while often innocent, can also play havoc with reporting systems.

Timeliness is another issue because of differences between the deadlines states set for drivers to obtain insurance and register their vehicles and the time insurers allow for policyholders to notify them of newly acquired vehicles. This issue may falsely cause some drivers to appear uninsured.

Reporting systems are expensive for states, insurers, and consumers, the IICMVA noted, with implementation and maintenance costs running into the millions of dollars.

Closing gaps

While tackling these issues, Alabama acted to close some of the gaps in implementing the state’s mandatory liability insurance law. Efforts included an extensive education program directed at law enforcement officials as well as requiring proof of insurance before issuing or renewing registrations.

Jay Starling, director of the Alabama Revenue Department’s Motor Vehicle Division, told Auto Insurance Report that the division is now checking 5.2 million insurance policies each month with more than 100 insurers. Meanwhile, police are running insurance checks at motor vehicle stops and accidents, he said.²

The state also closed a loophole in the law that allowed owners of uninsured vehicles to claim the vehicle as inoperable during an uninsured period. Alabama now requires that such vehicle owners produce proof of inoperability in the form of auto repair, towing, and storage bills before they can renew a registration.

Reinstatement fee revenue potential

Auto Insurance Report noted a sharp spike in reinstatement fee revenues as Alabama’s enforcement campaign took hold. Over the past four years, reinstatement fee revenues nearly doubled each year, growing from about $1 million to about $7 million. The Motor Vehicle Division reportedly expects reinstatement fee revenue to level out and start declining as more motorists comply with the verification process.³

The IICMVA report recognizes that state jurisdictions have a need to verify the existence of auto liability insurance: “Utilizing…online verification promises to be a cost-effective way to address this need, benefitting the states, insurers, and consumers.”

The IICMVA noted many potential benefits from an online inquiry approach, including:

documented online status of insurance information on demand
potential to incorporate online verification systems with license plate renewal programs
no need to exchange massive amounts of data that has limited usefulness
enhanced security of confidential insurance information within each insurer’s IT environment
better customer service
easier compliance for commercial insurers
cost-effectiveness for insurers in building one inquiry system, usable for all states and easily scalable⁴

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“Making the Case for Using Web Services to Verify Evidence of Auto Liability Insurance,” November 2017, v2.1, Insurance Industry Committee on Motor Vehicle Administration
Auto Insurance Report – Vol. 25, 24/1178; March 12, 2018
Ibid.
“Making the Case for Using Web Services to Verify Evidence of Auto Liability Insurance,” November 2017, v2.1, Insurance Industry Committee on Motor Vehicle Administration