Illinois Latest to Toughen Penalties Against Uninsured Motorists

By | August 4, 2003

Illinois drivers cited three times by police for driving without proof of the mandated auto liability policy will now have their drivers’ licenses revoked, while uninsured motorists involved in an accident that injures the other party will have their vehicles seized by authorities.

The two separate measures went into effect in July 2003, according to the Chicago Tribune. The latter measure, signed into law by Democratic Gov. Rod Blagojevich recently, also allows police to seize the vehicles of those who drive without a license.

Illinois passed its mandatory auto liability insurance law in 1990, but the Insurance Research Council (IRC) estimated in 2001 that 13 percent of the state’s drivers are uninsured, compared to 14 percent nationally. The group, a division of the American Institute of Chartered Property Casualty Underwriters, also said that Illinois was only one of six states whose number of uninsured motorists had increased.

Seventeen states had higher rates of uninsured motorists, according to the IRC study, which is based on insurance company data from 1995 to 1997 and calculates the ratio of claims made by individuals injured by uninsured drivers (uninsured motorists coverage) to claims made by individuals injured by insured drivers (bodily injury liability coverage).

IRC’s estimates are considerably higher than Illinois authorities’ estimates in the 4 percent range, which are gathered by random mailings to registered vehicle owners asked to provide proof of insurance.

The new Illinois law sets a minimum $500 first offense fee and suspension of vehicle registration until proof of insurance along with $100 is provided to the state.

The second offense will mean the vehicle registration is suspended for four months. Those driving with a suspended vehicle registration would face a $1,000 fine.

At least one agent said the new measures are not enough.

“If you’re talking about three times [before the license is revoked], then it could take three years or even five years before you really catch up with somebody,” Rebecca Korach Woan, principal at Active Insurance Agency in Chicago, told Insurance Journal.

Korach Woan also spoke at two hearings in June and July on the matter of uninsured motorists and released a white paper suggesting various reforms. In the white paper, she advocated revoking an uninsured motorist’s driver’s license as well as vehicle registration on the first offense.

“A suspended vehicle registration is inadequate to deter uninsured motorists from driving,” the white paper said. “Drivers will in some cases continue to drive the vehicle, or they will simply drive another car, sell their vehicle, or re-register the vehicle with a family member. A valid driver’s license is far more important than a valid vehicle registration because the driver’s license is used as a primary form of identification and is now verified as part of job application and credit checks.”

IRC senior vice president Elizabeth Sprinkel said a 1999 survey of state motor-vehicle departments showed that revoking an uninsured motorist’s driver’s license was the most successful penalty.

Other industry experts said the impact of Illinois’ measures depends on the willingness of judges to enforce the penalties.

“If you’ve got someone who can’t afford insurance for some reason and needs their car to get to work, you won’t find too many judges willing to slap the fine,” said Lynn Knauf, a personal lines policy manager at the Alliance of American Insurers. “If they can afford the fine, they can afford the insurance.”

Terry Tyrpin, senior vice president at the National Association of Independent Insurers, rendered an even harsher verdict.

“This whole prospect of trying to go after the uninsured motorists is a folly,” he said. “Ultimately, the system is going to cave at the bottom end. Society isn’t willing to inflict these kinds of penalties and deterrents. This is nothing more than a sexy issue politicians like to demagogue on. Insurance consumers wind up paying the price tag for this.”

Tyrpin estimated that uninsured motorists wind up costing insureds up to 20 percent more than the actuarially prescribed rate would otherwise be. Knauf praised the idea of so-called financial responsibility or safety responsibility filings, which narrows the group of drivers who need to be tracked by state motor-vehicle departments and insurance companies to those uninsured motorists actually involved in accidents that damage other drivers or their cars.

After such an accident, the driver is required to make restitution to the injured party and show proof of insurance to state authorities. She compared this alternative, which Wisconsin and Illinois employ, favorably to attempts at state databases matching up vehicle registration and insurance policies—whose cost is largely funded by insurers.

“These are very complicated databases,” Knauf said. “They are supposed to match up all insured vehicles with all registered vehicles. If it sounds too good to be true—it is. There are all kinds of matching problems, and there are all sorts of legitimate reasons why a registered vehicle might not be insured.”

Among these, Knauf said, are dual-use residents and older cars not currently operated by the drivers.

“All these things sound great if there are no mistakes,” Knauf added. With after-the-fact filings “you’re working from the premise of innocent until proven guilty and targeting the driver, not the vehicle. You more closely pinpoint the problem.”

NAII’s Tyrpin drew a distinction between motorists who are merely financially irresponsible and those who pose a genuine safety risk to other drivers.

“In the final analysis what makes sense,” he said, “is focusing resources where they’re needed. Otherwise it’s just an unnecessary dedication of government and private sector resources to no good end.”

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