After decades of broker-agents sharing driver motor vehicle records with insurers to underwrite and rate personal and commercial automobile policies, the California Department of Motor Vehicles late last year began requiring them to obtain a customer’s consent to share MVRs with insurers. Additionally, the DMV imposed new liabilities on broker-agents for the insurer’s misuse of the shared MVRs.
These new requirements are contrary to custom and practice and should be rescinded. Although informal discussions were conducted with the DMV to modify the new requirements, the DMV refused to change its edict. Therefore a legislative approach was sought.
On Feb. 26 California Assemblyman Jim Frazier, D-Oakley, introduced Assembly Bill 933, to require the DMV to permit insurance brokers and agents to submit MVRs to insurers for underwriting and rating automobile policies without restrictions. The bill is sponsored by the Independent Insurance Agents & Brokers of California.
Historically, independent insurance broker-agents who sell automobile insurance in California had easy access to MVRs, and were not restricted in providing that information to insurers. In 2014, the IIABCAL learned that the DMV was aggressively auditing broker-agents, threatening to revoke their authorization to obtain MVRs, merely because they were providing driving record information to insurers for underwriting and rating purposes.
The IIABCAL conducted meetings with the DMV on the issue. Thereafter, the DMV unilaterally implemented an Addendum to the Commercial Requester Agreement that purported to ease regulatory requirements regarding submission of customer MVR information to insurers. Ironically, the addendum added unnecessary burdens by requiring broker-agents to obtain written authorization from consumers prior to sending their driving record to insurers.
DMV’s Addendum is Deeply Flawed
The DMV’s addendum ignores the commercial realties of the insurance industry in a number of ways:
First: The addendum mandates that the broker-agent must obtain written permission from the client before sharing the MVR with insurers. California Vehicle Code only requires authorization to disclose the MVR, not written authorization. While obtaining written consent may be reasonable for the named insured in a personal auto policy, it doesn’t work for auto policies that insure multiple members of a household, where an MVR is required for each person on the policy. Usually, it is one family member who applies for the auto insurance policy on behalf of the entire family and authorizes the broker-agent to request an MRV for each family member. Similarly, in a commercial auto transaction, the broker-agent would not have contact with the individual drivers listed on the policy as the broker-agent’s client is the commercial employer. In practice, the commercial employer authorizes the MVR to be pulled for each driver seeking employment. Requiring the authorization of the applicant driver would obstruct and delay the process of hiring commercial drivers and procuring insurance.
Second: The addendum again goes beyond industry practice by holding the broker-agent responsible for how the insurer uses the MVR. Hence, a broker-agent could be found liable if an insurer illegally disclosed information in an MVR. This is inconsistent with the law of agency, imposing liability on an agent for the acts of the principal. In many instances, insurers require broker-agents to request an MVR on each driver in order to submit a request for a quote.
Third: The addendum also imposes an unnecessary and unreasonable obligation on the broker-agent to bear responsibility for all costs associated with notice to California residents “potentially affected by a breach of the security system, database or files” of an insurer receiving the MVR. The insurers are the ones in the best position to address such security breaches, as broker-agents have no control over the insurers’ information security systems.
Under AB 933, the DMV would not be allowed to prohibit “an insurance agent or broker from obtaining and distributing to an insurance company or to any policyholder of either a private passenger automobile liability policy or a commercial automobile liability policy any record or information that is open to public inspection.”
AB 933 would force the DMV to recognize the commercial realities of how broker-agents currently share MVRs with insurers to rate and underwrite automobile insurance policies.
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