The following is an edited summary of my discussions with Mississippi
Commissioner of Insurance Mike Chaney and Alex Hageli, Director of Personal
Lines for Property Casualty Insurers Association of America and current
Chairman of the Insurance Industry Committee on Motor Vehicle
Administration, regarding efforts to implement Mississippi’s online
verification system, including the system’s possible uses and desired
benefits.
Robert House: The purpose of online verification is simple – to verify
compliance with compulsory automobile insurance laws. Full compliance
does not seem realistic, but certainly there is room for improvement.
What are your goals for this new program?
Commissioner Chaney:
This is a legislative step in the right direction in helping bring auto and
UM rates under control. There are so many factors involved and it will take
a joint effort to bring rates under control. According to our statistics as
many as 34 percent of all Mississippi drivers are uninsured and they pass
the cost to those that are insured.
Many are uninsured because they can’t afford a policy because rates are too
high. To help bring rates down to affordable levels we need to address some
of the factors driving the high rates such as the fact that 51 percent of
the roads and 21 percent of the bridges in the state are in “poor
condition” which contributes to an increase in accidents. We need stronger
laws in regards to texting and driving and distracted driving and those
laws need to be enforced. The rising cost of auto repairs in the state
needs to be considered as well. Auto repair rates have risen 16 percent in
the last three years.
Alex Hageli:
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The national average rate of uninsured motorists is about 13 percent.
There’s no reason why this new program can’t drive Mississippi’s uninsured
rate down closer to the national average, if not below it. Alabama
implemented a similar system a couple of years ago, and it resulted in a
decrease in its UM rate. I expect the same to occur in Mississippi.
You are a subject matter expert on insurance verification systems. What
has been your involvement in verification systems?
Hageli
: I have served as PCI’s representative to the IICMVA since 2008, and
currently serve as chair. The IICMVA is an industry advisory group that was
formed in 1968. It acts as the liaison between the insurance industry and
Motor Vehicle Departments regarding implementation and maintenance of
compulsory insurance and financial responsibility laws. PCI hopes to
standardize much of how states track uninsured motorists as well as those
who have to file SR-22s. I’ve had the pleasure of serving on several state
advisory boards tasked with studying and solving the uninsured motorist
problem. I’ve also been involved with implementing verification systems in
Alabama, Nevada, Tennessee and West Virginia to name a few.
How does Mississippi’s effort to crack down on uninsured motorists
compare to other states?
Hageli
: There is a long and colorful history of efforts by states to
reduce uninsured motorists. Impounding of uninsured vehicles, plate pulling
… you name it, states have tried it. The Mississippi program actually is
cutting edge and I expect it will only be a matter of time until all states
that have a program have something similar.
Did you think it would take this long for the system to be up and
running?
Hageli
: Establishment of a successful online verification system is complex and
requires effort by multiple parties. The timeframe in the original
legislation likely was too optimistic given how many agencies were
involved. The vendor bidding process took longer than anticipated and there
were some systems limitations that added to the delay, but in the end I
think this system is going to work pretty well.
Who is responsible for the verification system?
Commissioner Chaney
: When the Legislature passed the bill that created the insurance
verification system they gave the oversight and responsibility for the
program to the Department of Public Safety. My role and the role of the
Department of Insurance is one of cooperation and assistance when
necessary. And we have done that. Since adoption of the act, the Department
has issued three bulletins on the verification system for the purpose of
keeping carriers informed of developments; furthermore, members of my staff
were very involved with the advisory group assisting with developing the
system.
[Editor’s Note: The Mississippi Department of Public Safety is charged
with administering and enforcing the Public Safety Verification and
Enforcement Act and with making rules for the administration of the
online verification system. At the time this article was submitted for
publication, no rules or regulations had been promulgated.
Representatives of the DPS declined to participate in these
discussions.]
What has been the most difficult part of setting up the verification
system?
Hageli
: Coordinating between the agencies, without a doubt. We don’t appreciate
how difficult it is for state agencies to come together and coordinate on a
project. Each has their own considerations, from personnel to systems
limitations. Once the vendor was selected, it was pretty smooth because
insurers already work with this type of program in other states.
You were part of the advisory group that weighed in on implementation
issues. Who were some of the other participants and how did this
compare with start-up activities in other states?
Hageli
: The group contained representatives from the Department of Insurance,
Department of Public Safety and Department of Revenue and industry
representatives ranging from companies, agents and trade groups. Initially
we made progress, but then we ran into some of the limitations I mentioned.
There was a reset to the process, and a new vendor came in and set things
up in pretty short order. I’ve been impressed with their work and, based on
my experience with other states’ systems, I think the system is going to
work well. Overall, it was similar to start-up activities in other states.
Who is the vendor for the system?
Hageli
: DPS awarded the contract to PASCO, a company out of Hudson, Ohio. It does
business as Validati and administers systems in California and New Mexico.
I don’t know the details on what happened, but DPS subsequently contracted
with HDI Solutions, LLC. HDI is located in Auburn, Alabama, and it has
administered the West Virginia program for the last several years. I
understand that the contract with HDI runs through June 30, 2018.
How much does the system cost and who pays for it?
Hageli
: That is an interesting question. Maintenance costs have been estimated to
be approximately $1.33 million per year.
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In fact, costs associated with creating and maintaining a system were cited
several years ago by former Governor Haley Barbour in his veto of prior
verification system legislation. Vendors generally propose that fees
generated by the system will more than cover the costs of operations. I
don’t know what the vendor is charging because I have not seen their
contract. But the Mississippi Legislature did appropriate $237,000 to be
paid to the vendor.
[Editor’s Note: The contract with the vendor should be available for
review on Transparency.ms.gov, but a search of that website did
not reveal the contract.]
How much revenue might be generated by the verification system?
Hageli
: Given Mississippi’s high rate of uninsured motorists the fees could be
substantial. It has been reported that at least one bidding contractor
projected the system would lead to fines of more than $150 million per
year. The initial notice of award indicated a three-year lifecycle revenue
of $464.9 million. That seems high to me, but verification systems are
indeed net revenue generators. But remember, the more effective the system
is at reducing the rate of uninsured motorists, then potentially less funds
would be generated by way of fines and penalties.
What are some of the verification system specifications and standards
of the IICMVA?
Hageli
: Without getting too deep into the weeds, probably the most important is
that the system utilize web services, which simply means that the system
has a live connection between the state and the insurance company to ensure
the information is as current as possible. Other standards include
processing the request within a matter of seconds.
There has been a lot of discussion within the insurance industry
regarding “book of business” reports and these have been somewhat of a
concern for insurers. Is this still an issue for insurers?
Hageli
: Book of business reports are simply a periodic reporting of policies by
insurers. The jurisdiction takes that information and matches it with
registered motorists. When someone with the state seeks to determine if a
driver has valid insurance, the system pulls information and sends it to
the insurance company to ensure it’s still an active policy. The industry
originally wanted to eliminate book of business reports with the move to
web services. States balked at the alternative of collecting insurance
information directly from motorists, and instead simply required companies
to continue reporting. So, in the end, Mississippi ended up with a hybrid
approach, if you will, that I think works pretty well.
From a regulator’s standpoint, how would you say carriers have
performed in connection with implementation of the system?
Commissioner Chaney
: All insurance companies licensed or authorized to write motor vehicle
liability insurance in the state have been very cooperative in providing
the necessary information to verify liability coverage for a motor vehicle
insured and registered in the state. I have been very pleased with this
cooperation and am confident that the spirit of cooperation will continue
throughout the duration of the system.
How current is the data in the system?
Hageli
: There is always going to be lag time with any system. When a policy is
sold, the application has to be processed and uploaded to the insurer’s
system. Usually that happens fairly quickly, but it does create the
possibility that a new policy won’t be in the system. However, law
enforcement officers generally can exercise discretion in writing tickets
in these types of situations. If you show current paperwork, maybe you
won’t get a ticket.
How does the system work?
Hageli
: It starts with a traffic stop. The officer inputs the license plate
number into the National Law Enforcement Telecommunications System (NLETS)
to obtain information about the driver. Once the vehicle registration
information is accessed, the VIN is matched against the state’s database of
insurer books-of-business records. If there’s a match, the system submits
four data elements, or tokens, to the insurer of record. The insurer
receives that query and searches its own database to either confirm that
the policy is still valid, or send an unconfirmed response. An unconfirmed
response can mean a couple of things. That the policy is no longer valid
because of cancellation, or that the insurer can’t validate all of the
tokens. There may be a mismatch in VIN or policy numbers between what was
submitted in the query and the insurer’s records. The system does provide
reason codes that explain an unconfirmed response.
There’s also the possibility that no match is found during the initial
search of the books-of-business records. In that case, the system sends a
broadcast, or unknown carrier request, to all insurers in the state asking
if they insure that particular vehicle. Coverage is confirmed if an insurer
finds the VIN in their system as a covered vehicle. If there is no
response, then it is treated as unconfirmed and the motorist will most
likely be ticketed.
This entire process plays out over the course of one or two seconds and the
officer knows before he or she even steps out of their vehicle, if there is
valid insurance on the vehicle.
Do drivers still need to have insurance cards with them for any reason?
Hageli
: Yes. The card carry law is still in force. Also, if an officer is not
able to verify insurance through the system, he is instructed to check the
insurance card. Again, law enforcement officers have certain discretion in
issuing tickets. And in Mississippi and several other states insurance
cards may be kept by electronic image on your phone.
Can law enforcement use the verification system to stop a driver?
Hageli
: No. Law enforcement officers may not use the system to stop a driver
solely for operating an uninsured vehicle. Only upon reasonable cause of a
traffic violation or that a vehicle is unsafe or not equipped as required
by law may an officer utilize the system in order to verify insurance. But
the system can be used at roadblocks to verify coverage.
What can consumers do to ensure the system contains accurate
information?
Hageli
: Only authorized individuals have access to the actual system, but
motorists generally can check whether their state’s system shows they have
insurance.
Does the system apply to all motor vehicles?
Hageli
: No, it does not. Vehicles with commercial auto coverage, those qualified
for a fleet registration, those exempted from the proof of insurance
requirement, and those with a gross weight of 16,000 pounds or greater are
exempt. Insurers must furnish commercial auto coverage customers an
insurance card marked with the identifier “Commercial Auto Insurance” or
“Fleet” or similar language. Upwards of 30% of vehicles are covered by a
commercial policy, and there is no way to tell that just by looking at the
vehicle. So the insurance card is still very important for commercial
purposes.
What are the penalties for not having minimum liability insurance
coverage?
Hageli
: The penalties are pretty severe, but some might say not severe enough.
The act requires the suspension of the operator’s driving privilege
(license) and civil penalties of $300 for a first violation, $400 for a
second and $500 for a third and subsequent violations. Once suspended,
driving privileges will not be reinstated until the owner has in place
liability insurance in at least the minimum amounts required by Mississippi
law and has paid the civil penalties imposed.
Will someone without vehicle liability insurance be able to purchase or
renew a tag?
Hageli
: That is a good question. Originally, the statute provided that every
owner of a vehicle must have the minimum amounts of liability coverage
before he could receive or renew a registration (license plate or tag).
This was to be accomplished by county tax collectors having access to the
verification system through the existing title/registration system. This
proved to be very controversial, especially with certain tax collectors.
Also, there were questions of computer software capabilities at both the
county and state levels, but I understand a new system for tags and titles
has been implemented so I would think this should no longer be a problem.
This provision was removed from the statute in 2015. Some people strongly
favor preventing registration of vehicles without proof of insurance. In
fact, bills to reenact this provision are pending before the Mississippi
Legislature.
[Editor’s Note: House Bill No. 1024, as introduced in the 2018 Regular
Session of the Mississippi Legislature, would require county tax
collectors to verify minimum liability coverage before issuing annual
renewal registrations. At the time this article was submitted for
publication, due to push back from county tax collectors the bill had
been revised to require that tax collectors only notify vehicle owners
of the minimum insurance requirements.]
Are there any states that do utilize their systems to verify coverage
at the point of registration?
Hageli
: Most of them do. But a lot of them also allow for a grace period for
verification, meaning they understand that a newly purchased vehicle might
not show insurance coverage because the owner has not yet informed his
insurer of the purchase. The grace period allows time for processing, and
states will then re-run the vehicle 30, 60 days later to check for
coverage.
Red-light cameras and toll enforcement cameras are common in certain
jurisdictions. Do you anticipate cameras being used in conjunction with
verification systems to catch uninsured drivers?
Hageli
: It’s already here. Two parishes in Louisiana issue tickets based on
license-plate scanner results, and we expect that to spread to the rest of
the state. Oklahoma also passed a law authorizing such a system, but it is
contingent upon some systems changes and hasn’t been deployed. Similar
legislation has been proposed in Rhode Island the last couple of years and
looked like it was going to pass but in the end it did not. I expect this
will spread to other states in time, but if you ask me checking for
insurance at the point of registration seems more efficient.
Are you hopeful this new program will begin to change the culture in
Mississippi that it is OK to drive without insurance?
Commissioner Chaney
: It is the Department’s hope that this program is a step in the right
direction in changing that mindset. There is still much work to be done;
however, this program helps close a loophole in current Mississippi law. We
will continue to work closely with the Legislature to determine what laws
should be created and amended to benefit Mississippi consumers.
Will the online verification system result in fewer uninsured motorists
on Mississippi roads?
Hageli
: Without a doubt. The only question is by how much. And for that, we’ll
have to wait and see.