How Harmful Are Uninsured Driver Verification Programs?

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  • Nationwide, hundreds of millions of Americans have auto insurance that will cover them in just about any instance. However, millions more go without such coverage, and create a potentially major problem for insurers and other drivers. For this reason, more states are now putting into place coverage verification databases to help deal with this issue, but experts wonder how helpful these systems are, and what they could mean for all drivers. Meanwhile, insurance agents in states where these databases are being set up might need to talk to their clients about what these changes might mean for them going forward.

    Auto insurance verification databases are designed to crack down on the roughly 30 million consumers who don’t have coverage nationwide, and whose accidents end up costing the insurance industry – and, by extension, other drivers – some $2.6 billion annually, according to a report from the consumer advice site Nerdwallet. These systems run auto registration data for cars and cross-reference it with insurance information; when discrepancies arise, drivers are asked to prove they have such coverage. Generally, they’re pretty good at finding drivers who don’t have insurance.

    Some opposition exists
    However, these programs have also drawn criticism from some consumer advocates, the report said. While most of these programs are used only when a driver is stopped by police, some simply search for and find potentially uninsured residents and simply mail them their demands for proof of insurance. Critics say that these mailings are typically random, and may hit people with fines they can’t afford, even if they’re uninsured for relatively innocuous reasons (such as a change in carriers leading to their missing out on coverage for a short period). However, most experts agree that both types of systems will be in place in various states for years to come.

    Insurance agents who can connect with clients and help them to understand all the rules and regulations they face over time might be able to build better relationships with those people. That can go a long way toward boosting customer satisfaction, even more so than simply being able to find them a discount on their coverage. Thus, agents who can successfully do both at the same time might be in the best position to keep customer retention rates and referrals as high as possible going forward.