RD602 - Virginia Automobile Insurance Study -- December 2018

  • Published: 2018
  • Author: Department of Motor Vehicles
  • Enabling Authority: Request of House Committee on Commerce and Labor (2018)

Executive Summary:

During the 2018 General Assembly session, Senators Newman and Surovell patroned bills that attempted to raise Virginia’s automobile liability insurance minimum limits. Virginia’s minimum liability limits are $25,000 for bodily injury or death of a person; $50,000 for bodily injury or death of two or more persons; and $20,000 for property damage. Senator Newman’s SB 364 attempted to raise the property damage minimum limit from $20,000 to $50,000. Senator Surovell’s SB 611 attempted to raise all three limits such that a minimum policy would have to have coverage of at least $100,000 for bodily injury or death for one person; $200,000 for bodily injury or death for two or more persons; and $40,000 for property damage. The Senate Transportation Committee incorporated SB 611 into SB 364 and passed SB 364 with the property damage limit raised to $50,000.

The House Commerce and Labor Committee considered SB 364 and voted to continue it to 2019 as Assembly members expressed concerns as to the impacts of raising Virginia’s minimum liability limits. On March 6, 2018, the Department of Motor Vehicles (DMV) received a charge letter from Delegate Terry G. Kilgore, Chairman of the House Commerce and Labor Committee. In the March 6th letter, Chairman Kilgore requested that DMV prepare an analysis and develop recommendations concerning potential increases to the property damage minimum liability. As DMV began its analysis, Commissioner Holcomb and Chairman Kilgore discussed other concerns members had expressed relating to Virginia’s automobile insurance industry. As a result of these discussions, Chairman Kilgore sent DMV a second charge letter on March 27th, expanding his request to a DMV-led stakeholder study of numerous topics relating to automobile insurance in Virginia.

In the March 27th letter, Chairman Kilgore requested that DMV convene a stakeholder group to discuss automobile insurance in Virginia and to make recommendations that would increase compliance with Virginia’s insurance laws. In particular, Chairman Kilgore instructed the DMV-led stakeholder group to study the following:

• Virginia’s motor vehicle insurance minimum liability limits;
• the Uninsured Motor Vehicle Fee;
• DMV’s Insurance Verification Program;
• proof of insurance at the time of registration;
• proof of insurance when operating a motor vehicle;
• information reported to DMV regarding changes in insurance coverage;
• driving records review prior to issuing an insurance policy; and
• any other relevant aspects of Virginia’s minimum motor vehicle financial responsibility requirements.

Chairman Kilgore requested DMV compile a report containing all stakeholder recommendations to be presented to the House Committee on Commerce and Labor in December 2018

Stakeholder Research

DMV convened four stakeholder meetings attended by representatives of the insurance industry, highway safety advocates, law enforcement representatives, the State Corporation Commission (SCC), and many others. At the first and second meetings, stakeholders reviewed Virginia’s insurance laws and examined data concerning how successful Virginia’s insurance market is in providing insurance coverage to Virginians. In particular, the stakeholders compared Virginia’s minimum liability limits, uninsured motorist rates, and average premiums to those of the 50 other U.S. jurisdictions. Based on the provided data, the stakeholder group concluded that Virginia has a robust insurance market that is successful in providing Virginians access to insurance coverage.

In the third and fourth meetings, stakeholders focused on technical improvements to DMV’s insurance verification process. Stakeholders were particularly concerned with improving information sharing between insurance companies and DMV to better identify violations of Virginia’s insurance laws. By the end of the study, stakeholders decided upon numerous recommendations impacting all steps in the insurance verification process that they believed would increase compliance with Virginia’s insurance laws.

Stakeholder Recommendations

The stakeholders concluded that the insurance market is functioning well in Virginia, and, as such, focused their attention on recommending enhancements to current processes. Based on the presented research and stakeholder meeting discussion, stakeholders identified 23 recommendations to present to the General Assembly.

In five of the 23 recommendations, stakeholders suggested that the General Assembly make no changes to current law. Stakeholders identified six recommended changes to DMV’s administrative processes. Finally, stakeholders recommended the General Assembly consider 12 legislative changes, which include improvements to insurance companies’ reporting requirements, and DMV’s insurance verification process, plate surrender process, and noncompliance fee installment payment plan. The draft legislation in Appendix D of this report includes all recommended legislative changes.

A few topics listed in the study charge do not have recommendations as the stakeholders did not reach a consensus as to what change was necessary. For easy reference, the recommendations have been grouped below based on what type of change was recommended. The recommendations are numbered based on their order within the body of the report.

Stakeholder Recommendations: Legislative Change

Recommendation 7: Insurance companies should report to DMV that the company processed an uninsured motorist claim involving an uninsured motor vehicle registered in Virginia; and following receipt of the report, DMV should initiate the insurance verification process (pg. 34).

Recommendation 8: The General Assembly should require insurance companies to electronically report all necessary insurance information to the DMV (pg. 38).

Recommendation 10: The General Assembly should require insurance companies to report all required insurance information to DMV within 30 days of a policy change (pg. 38).

Recommendation 11: The General Assembly should require insurance companies to respond to all DMV requests for acknowledgement by confirming or denying the existence of an insurance policy within 15 days of receiving the request (pg. 38).

Recommendation 12: The General Assembly should amend the Code of Virginia to accurately reflect the types of policy updates and necessary data fields required for DMV to efficiently operate its insurance verification process (pg. 38).

Recommendation 13: The draft legislation should include an enactment clause to allow DMV to monitor the performance of insurance companies in complying with reporting requirements over the next four years (pg. 38).

Recommendation 17: DMV should be allowed to dispense with a customer’s suspension if a customer provides evidence he or she was in compliance with Virginia’s insurance laws (pg. 42).

Recommendation 18: DMV should be allowed to permit surrender of plates online or by phone without the customer physically returning his or her plates to DMV; when a customer chooses this method of surrendering his or her plates, DMV should not provide a refund (pg. 44).

Recommendation 19: The General Assembly should clarify the language concerning the noncompliance fee charged after a violation of Virginia’s insurance laws (pg. 48).

Recommendation 20: The General Assembly should increase the non-compliance fee from $500 to $600 with the additional revenue to be designated to DMV’s Special Fund to be used for enhancements to DMV’s Insurance Verification Program (pg. 48).

Recommendation 21: The General Assembly should expand the eligibility requirements to enter into a non-compliance fee installment payment plan by eliminating the residency requirement and by allowing for multiple defaults (pg. 51).

Recommendation 23: The General Assembly should authorize the Commissioner to extend any installment payment due date by up to 30 days when events outside of the Department’s control impact DMV’s ability to accept payment (pg. 51).

Stakeholder Recommendations: Administrative Change

Recommendation 4: DMV should require applicants for original vehicle registration to provide the name of their insurance company when the applicants certify that they are insured (pg. 27).

Recommendation 9: DMV should upgrade its mechanism for reporting liability insurance policies that satisfy financial responsibility requirements (pg. 38).

Recommendation 14: DMV should adjust its processes to better address insurance monitoring following a re-title due to a co-owner’s death (pg. 38).

Recommendation 15: DMV should reduce from 60 days to 45 days the time period allowed for insurance companies to report a policy change before DMV issues an insurance monitoring notice (pg. 42).

Recommendation 16: DMV should eliminate the third opportunity for a customer to provide insurance information in cases involving a denial of coverage and reduce customer response to a second insurance monitoring notice from 21 days to 15 days (pg. 42).

Recommendation 22: DMV should offer customers the option to enter into a non-compliance fee installment payment plan online (pg. 51).

Stakeholder Recommendations: No Change

Recommendation 1: The General Assembly should not require insurance companies licensed to do business in Virginia to review an applicant’s driving record prior to issuing an insurance policy (pg. 17).

Recommendation 2: The General Assembly should maintain Virginia’s 25/50/20 automobile liability insurance minimum limits (pg. 24).

Recommendation 3: The General Assembly should not require applicants for minimum liability coverage to sign a statement from their insurance company acknowledging that the policy is at the minimum limits (pg. 24).

Recommendation 5: The General Assembly should not require Virginians to carry proof of insurance while operating a motor vehicle (pg. 28).

Recommendation 6: If the General Assembly maintains Virginia’s uninsured motor vehicle registration option, then it should maintain the current $500 fee amount (pg. 32).

Collaboration with the State Corporation Commission

DMV staff would like to thank SCC staff for their invaluable assistance throughout the study process. In particular, DMV would like to thank Rebecca Nichols, George Lyle, Katie Johnson, and Eric Lowe for their willingness to gather data, explain terminology, and review documentation.