Ala. Senate Advances Bill to Set Up Insurance Verification System

State senators unanimously approved on Wednesday the establishment of an Alabama automobile insurance verification system.

The legislation was introduced by Senator Arthur Orr to help catch residents driving in the state without mandatory liability coverage, which has been identified as a significant problem for the state.

A study that analyzed the rates of bodily injury and uninsured motorist claims filed in the 50 states in order to estimate the proportion of uninsured drivers pegged Alabama as having the third-highest rate of uninsured motorists in the nation. The study, conducted by the Insurance Research Council, estimated that in 2007 about 26 percent of Alabama drivers lacked coverage.

Establishment of an electronic database would make it easier for law enforcement and other government workers to verify an individual’s insurance status.

The legislation passed by the senate would also make it more difficult for uninsured motorists to drive without getting caught by requiring verification of coverage before registering or renewing registration on a vehicle.

If the system is ultimately approved, insurers would send updates to database administrators about the issuance or discontinuation of policies.

Drivers would still need to carry proof of coverage.

The legislation now must be approved by the house and the governor before becoming law.

A couple dozen states have implemented similar verification systems in order to help curb the uninsured motorist issue in their states. Problems have arisen with some, though.

According to the Insurance Industry Committee on Motor Vehicle Administration, there are a number of issues that can crop up in maintaining the databases. The industry trade group has said that there are issues of accuracy, timeliness and consistency that undercut the effectiveness of verification systems.

The Insurance Information Institute reported that when Oklahoma first set up its system, it was operating at only a 60 percent rate of accuracy.

And in November, reports were coming out of Nevada saying that the system there was routinely misidentifying drivers as uninsured.

About John Pirro
John Pirro is a licensed fire and casualty insurance agent specializing in various aspects of the auto insurance industry. He worked in the auto body repair industry before taking a reporting position at Online Auto Insurance News.

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