Under Idaho Bill, Cars Registered Out of State Face Non-Renewal

A piece of legislation in Idaho allowing insurers to not renew policies covering cars that are registered out of state has passed the state Legislature by wide margins.

HB 11 passed the state House by a 65-0 vote early last month and the Senate by a 34-0 vote on March 1, according to the state’s legislative website. It was signed Tuesday by state House Speaker Scott Bedke (R-Oakley) and resubmitted to the Senate as it heads toward final consideration from Gov. C.L. “Butch” Otter.

Under HB 11, an insurer can choose to not renew a policy if “the insured automobile is registered in a jurisdiction other than Idaho.” The law was written to address policyholders who moved out-of-state but kept their policies in Idaho, where “rates are pretty reasonable,” according to John Mackey, an industry lobbyist who supported the bill.

According to the National Association of Insurance Commissioners (NAIC), Idaho is the fourth-least expensive state for auto coverage in the U.S.

“There were a few folks hanging onto Idaho insurance but had moved to a place where we’re not licensed to do business,” Mackey said in an interview with Online Auto Insurance News. “If they moved to a state where coverage is more expensive, they’d like to hold onto the Idaho coverage if they can.”

The legislation received heavy support from the state’s insurers that brought the bill to representatives at a House Business Committee meeting earlier this year. There, the National Association of Mutual Insurance Companies (NAMIC) also backed the bill called it a “reasonable and consumer-protection oriented” measure for the state’s industry.

Under HB 11, an insurer cannot cancel a policy in the middle of its term because it is not registered in the state, even if the vehicle is re-registered out of state during the policy term. Rather, the legislation gives insurers the option of waiting until the end of the policy term and then refusing to renew it, a provision that NAMIC said is appropriately lenient on drivers while preserving the bill’s intent.

“If the person is willing to register a car in another state and give that registration fee to another state’s government, that person should also be okay with purchasing auto insurance in that state,” NAMIC said in written testimony to legislators.

According to Mackey, HB 11 was a “simple” measure to “clean up some of the code sections that speaks to cancellation of policies.”

“It dictates to us the grounds for nonrenewal,” he said. “And moving to another state wasn’t a part of grounds for nonrenewal before the bill.”

It will be up to insurers to keep track of which policyholders move out of state, Mackey said.

Bill Addressing Similar Issue Circulating in NJ Legislature

New Jersey has also encountered a problem with auto policyholders misrepresenting their residency in a bid to lower their costs. New Jersey’s situation is different from Idaho’s, though, with Garden State residents buying policies in other states to duck high insurance costs back home. New Jersey has one of the country’s highest average prices for an auto policy.

The price is so high, according to Assemblyman Wayne DeAngelo (D-Hamilton), that he sponsored a bill to classify “reverse rate evasion” as a crime to stop New Jersey drivers who buy auto coverage in nearby states like North Carolina and Pennsylvania but keep the vehicle in New Jersey.

“Vehicle owners who misrepresent their residence are looking to reduce their own insurance premiums, but this instead results in a loss of revenue to the state, higher premiums for those who properly register their vehicles and reduced revenue for New Jersey insurers,” DeAngelo said in a statement.

Angelo’s bill, A 2204, was put in an Assembly committee on Feb. 2 but hasn’t seen action since.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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