Federal Driver License Standards Possible Asset for Auto Insurers

June 17, 2002

In addition to being a key element in national security, federal driver’s license standards being considered in Congress could have profound effects on auto insurance, according to the National Association of Independent Insurers (NAII).

Members of the NAII Personal Auto/Nonstandard Auto Insurance Committee recently expressed general approval of the concept. But they stressed that any activity aimed at establishing such a system must be monitored very carefully to avoid unintended adverse repercussions for the public as well as insurers.

“Besides significantly increasing national security interests, a system establishing a single driver’s license—and one driving record—for each individual could indirectly aid insurers,” Terry Tyrpin, NAII senior vice president, insurance and research services, said.

“Motorists then would no longer be able to hide bad driving records or other underwriting information by obtaining multiple drivers’ licenses,” he continued. “And insurers should be more likely to discover if one of their policyholders had an accident or serious violation in another state. Insurance premiums then could be adjusted accordingly and good drivers would not have to pay higher premiums to subsidize bad drivers.”

Congress already has experience with the “one license-one record” concept through the 1986 Commercial Motor Vehicle Safety Act that implemented a commercial driver’s license based on federal standards.

“If the federal legislation includes authority and funding to link the state motor vehicle record databases and compel driver’s licensing authorities at the state level to check the records of other states and report local enforcement actions, the payoff could be significant.” Tyrpin added. “The potential result would be more accurate driving records, and insurance premiums would more closely reflect real-life situations.

“Over time, highway safety will be improved by deterring motorists from holding multiple licenses, hiding out-of-state traffic law violations or acquiring a driver’s license under false pretenses.”

Insurers have expressed mixed feelings about so-called “smart card” drivers’ licenses that could include a computer chip, as is being contemplated in a bill introduced in Congress by Rep. James Moran (D-Va.) and Thomas Davis (R-Va.).

On the one hand, a “smart card” license could result in more information being loaded into the license, which could help law enforcement officers. On the other hand, issues could arise regarding what data is to be entered into the card, who has access to it, how the information is to be kept up-to-date, etc.

Illustrative of the need for federal standards, Tyrpin added, is that eight of the 19 terrorists involved in the Sept. 11 terrorist attacks obtained valid state-issued identification cards by exploiting a loophole in Virginia law that requires applicants only to present a notarized form vouching for their in-state residency.

Officials estimate there may be more than 240 different types of valid driver’s license/identification cards throughout the country, he said. State requirements for licenses range from those incorporating high-tech biometric identifiers to others that do not even require proof of residency.

“A threat to national driver’s license standards exists as some privacy groups contend the new licensing procedures could evolve into a national ID card,” Tyrpin said. “It would be regrettable if these groups thwarted an initiative crucial to national security interests and to improving the integrity of the driver’s license and driving record system.”

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