Inaccurate, incomplete motor vehicles records (MVRs) not only compromise highway safety and force good drivers to subsidize bad drivers, they also cause insurers to rely on other methods to fully assess individual driver risk, the American Insurance Association (AIA) said in response to a new study by the Insurance Research Council (IRC).
“High-risk drivers are out there on the road, and a huge number of them are paying much less for their insurance than they should be because of inaccurate motor vehicle records,” David F. Snyder, AIA assistant general counsel, said. “While that’s great news for those poor drivers, it’s terrible news for the vast majority of policyholders who pay more as a result.”
A study of court records and motor vehicle records in four states released last week by the Insurance Research Council (IRC) shows that one in five convictions for traffic violations may be missing from motor vehicle records, and that nearly half of the convictions a driver receives in one state might not transfer to that driver’s record in another state if he or she changes residence.
The IRC study was limited to traffic citations that resulted in convictions, meaning that the results are only the tip of the iceberg when it comes to the epidemic of inaccurate, incomplete MVRs, Snyder said. “What about violations that are detoured before they even make it to the judicial stage?” he said, citing violations erased by paying a fine, attending traffic school, or through other legal means. “The fact that these violations don’t end up on a person’s MVR does not magically erase them from existence.”
The IRC report has repercussions beyond the usual debate about the accuracy of MVRs, Snyder said. The report’s findings confirm the importance of tapping other correlative data sources to accurately predict a driver’s future loss potential. For example, an individual’s credit history is often as predictive—if not more predictive—of future claims than MVRs. “Opponents of credit-based insurance scoring like to ask how a person’s history of financial responsibility can possibly be a better predictor of future loss than that person’s driving record,” Snyder said. “This report, we think, provides one very clear answer to that question.”
While some critics have raised questions about the accuracy of credit reports, as well, those mistakes don’t come close to the magnitude of the problems with MVRs, Snyder said. The vast majority of mistakes on credit reports have to do with information such as name, address, and job history, he said – things that do not get factored into an insurance score.
AIA is supportive of pending federal legislation that would institute minimum standards for MVRs and improve the exchange of conviction information between states. “Beyond the insurance ramifications, the current system is not giving states and municipalities the data they need to make highways safer,” Snyder said. “Incomplete, inaccurate MVRs allow truly dangerous drivers to remain on the highway where they jeopardize the safety of themselves and everyone around them.”
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