Thursday, August 12, 2010

Correction: Insuring unlicensed drivers

Thanks to the reader who alerted me via email to an error I've been making fairly routinely when discussing the Driver Responsibility Program, including I fear in testimony earlier this week to the House Public Safety Committee. I've mentioned several times that insurance companies won't write policies to unlicensed drivers, arguing that when the state revoked licenses under the Driver Responsibility Program, it is increasing the number of uninsured drivers. But this reader forwarded me a scanned Greensheet advertisement promoting liability insurance for sale even if you don't have a driver's license. The ad was unclear and I've heard that statement so many different times from different sources, I was skeptical, so this fellow called the company, writing back a few hours later:
I just checked with the Baja agent to make sure the insurance available with “no license” applies to Texas registered cars in Texas. According to our conversation, if you tell the agent “no license” you can get this insurance. If you tell the agent you have a suspended license, they may put it down and there’ll be trouble with the state.
The part about "trouble with the state" still sounded like it might be illegal or somehow improper for those with licenses suspended because of the Driver Responsibility Program. So this morning I emailed Jerry Hagins at the Texas Department of Insurance Public Information Office who informed me:
A driver's license is not required, by statute, in order to purchase auto insurance, but practically speaking, most insurance companies require it in their underwriting guidelines. Some insurers may write a policy for an applicant with no DL but require that a Texas DL be obtained within a certain timeframe; or they may write a policy but add a surcharge; or they may write a policy if the applicant can verify driving experience via some other means. It may require a lot of shopping around to find an insurer who will write a policy to an applicant without a drivers license but it is permitted.
So there you have it. Most insurance companies won't cover you without a driver license, but with so many people out there with suspended licenses, clearly providers have arisen to service this risky submarket because of its shear volume and the potential for predatory pricing.

I'd never been under the impression, FWIW, that state law forbade such insurance products, I just couldn't imagine auto underwriters willing to write policies for people with licenses suspended for cause. My apologies for the error. Who'da thunk? I wonder if the rise of such insurance products is directly attributable to the advent of the Driver Responsibility Program and the proliferation of administrative license revocations as punishment?


Anonymous said...

Back when the DRP first started, I got a ticket for no insurance (a series of stupid mistakes on my part led to the bill not being paid and my insurance being canceled (Needless to say, I was not very responsible at the time) without my really being aware that it had been canceled.

In my calculations, I realized it was cheaper to just pay the ticket and switch to a new insurance company than to retroactively renew my former policy and, hopefully, get the ticket dismissed. I didn't know about the DRP program, so I didn't include that in my monetary calculations.

A couple of months later, I moved. Since my license was expiring in six or seven months, I went ahead and broke the law and didn't bother to update my address. Apparently, it was during that time that I was informed by mail of the DRP surcharges, but I never received the notices.

It was only when I went to renew my license a few months later that I was told my license had been suspended. I had to pay the first year's surcharge in full, pay $100 fee and get an SR-71 (or something like that) from an insurance company and make multiple trips to the DL office to get my license reinstated. All told, it was about two more months between the time I paid off the first year's surcharge and when I finally got my license back.

Throughout that time, I continued to make payments to my new insurance company and was never told by them that my policy was not in force. I don't know what would've happened had I been in an accident or otherwise had to file a claim, but, at least on paper, I was an insured, non-licensed driver throughout my suspension period of several months.

Anonymous said...

Wow. Very interesting story (From Anonymous 11:35). And a very surprising twist in the vagaries of this DRP/insurance story.

John said...

I have an SR-22 insurance policy for my wife whom is suspended because of the DRP. They continue to accept payment for the policy and have been made fully aware of her license status. They said that I can hold the policy as long as I want for her becuase in order for her to get a license she has to prove that she has an SR-22 on file with the DPS. Now that being said, I am positive that if she were to get into a wreck the company would not pay out because she should not have been driving in the first place without a license, whether she is insured by them or not. But on the other hand, if she were to get pulled over, she would get a no license ticket but could not get one for no insurance because in fact she has a policy....... Confused yet??

Don said...

Also, somebody has to have a liability policy on the car to register it. If the car is in the person's name who has no license, and there is no liability with that person's name on it, then how do they get a registration, or an inspection sticker?

Anonymous said...

Already told you that in these comments some time ago. I went to a strip mall in San Antonio that contained two auto insurance companies. I had no DL, just an out of state ID card. The first one agreed to write a policy if I promised to come back in 10 days with a license. The second one did it no questions asked.

So I drove around without a license for a while, big deal. At least I was insured and had current registration and inspection. I needed all that to go take a driving test.

I had been living in NYC for years and had no need for a vehicle or a license. There really are people in this world who choose not to drive for reasons other than being a loser and high risk. They shouldn't be penalized just for not maintaining a vehicle in perpetuity. As long as the driving record is clean for the last 3-5 years there shouldn't be a problem. Write them a policy.

Gritsforbreakfast said...

No offense, 5:11, but anonymous commenters say a lot of things on this blog and there's no way I can spend all my time chasing down each one. This guy a) emailed using his real name and b) actually had documentation (an ad and what he reported from his phone call) that provided evidence instead of just a contradictory opinion. I generally will react when presented with evidence that contradicts my views, while I tend to take anonymous disagreement with a grain of salt.

Also, fwiw, I was aware of SR22 insurance products aimed at qualifying people get their license back, but was under the impression that was a very short-term thing, like the company in 5:11's example who said he'd have to come back with a license in 10 days. (My wife worked on auto-rate cases at TDI in the '90s for the Office of Public Insurance Counsel, and she says she'd heard of insurers giving 30 days to get a DL.) What's surprising to me is that they'd insure a driver long-term who'd lost their license for cause, as in John's example. It only makes sense because a) the pool of unlicensed drivers is so large and b) at that scale, license revocation becomes a less significant indicator of driving risk.

I wonder how common it is for people with surcharge revocations to drive insured vehicles on an ongoing basis? Now that the state has their TexasSure insurance database fully rolled out, I suppose it would be possible to cross reference drivers license revokees with insurance policies to quantify it.

After giving it some thought, it seems like a lot of these machinations (the creation of insurance products aimed at unlicensed drivers) may be to just sell short-term insurance so drivers can register a vehicle or get an inspection sticker, etc.. I wonder how many people (licensed or unlicensed) buy insurance for one month (or do the same thing via pay by the mile) then drop it after getting their car inspected? Texas now collects the statewide data needed to calculate that.

Also, if a company knowingly sells insurance to a driver who lost their license for cause, I wonder if (and if so, how) they could justify refusing to pay claims because of their unlicensed status, as John suggests? It'd be one thing if the driver made fraudulent representations, but it sounds like some companies are willing to sell to unlicensed drivers (at predatory rates, no doubt) no questions asked.

Anonymous said...

In order for drivers to get an occupational license from the court, once their license is suspended for refusing or failing the breath or blood test, they MUST present an SR-22 to the court. Most people can't afford to carry that insurance, so they just take the risk and drive around with a suspended license. Then once their initial ALR suspension is over, they are usually suspended again because they cannot pay their surcharges to the State. It is the most idiotic and confusing mess ever. Some courts have special docket days for Driving While License Suspended cases...more serious grade offense if connected to a DWI suspension...go visit one of these courts on any given is a zoo. The frustration of everyone involved in the process is horrible. I knew a Judge that had a dedicated phone line available those days just to stay on hold with DPS to try and figure it all out. Worthless and poorly thought out program.

Anonymous said...

I'm the first anonymous, and I'd send my name directly to you, but I don't want to publicly post my name with the embarrassing incident on the comments section of a public blog.

Personally, I think the insurance company was just never made aware of the fact that my license had been suspended. (I only got an SR22 form because the DPS required me to in order to get my license reinstated, and that was at the end of the process, just about a week before I got my license back).

But I had an active DL when I signed up for the insurance. They weren't selling an unlicensed driver a policy. They just didn't cancel it during the time my license was suspended/revoked/whatever they call it.

dinordi said...

I was side-swiped in an automobile accident a few years ago. When my insurance company found the other driver at fault and wouldnt pay, she decided to sue. When the case went to court, the prosecution stated I shouldnt be on the road with a revoked DL and I lost the case. Fortunately for me, my insurance covered the large settlement.

Just thought I'd mention a different way this loathsome law negatively effects our society.

Sarah said...

I work for an insurance company and what we do in these cases is on the day that you are going to go get your license reinstated you go and get the policy written and they should give you something to take to the DMV and as soon as you get your license reinstated (has to be same day) you go back to the insurance office and give them copy of license........then they can send it through.

Anonymous said...

My son was hit by guy who had insurance but no DL. Can Insurance company refuse to pay if he refuses to fill out paperwork? Should they not be responsible to pay our costs because they insured a drivers who should not have been behind the wheel?