Texas agents: Be ready for financial responsibility verification

In early 2008, most drivers in Texas (read, “many of your insureds”) will come under the new Financial Responsibility Verification Program aimed at reducing the number of drivers without proper proof of financial responsibility. The exact date is yet to be announced and not all details have been worked out. So, what’s an agent to do?

The answer likely depends on what a given company may ask an agent to do. Compliance with the program could involve independent agents on several levels, especially in cases where carriers ask agents to assist in making sure policyholder information is current and accurate, and matches information reported by the Texas Department of Transportation (TXDot) and the Texas Department of Public Safety (DPS).

The Texas Department of Insurance, which is shepherding development of the FR program, believes the biggest challenge facing successful implementation lies in communication between auto insurance policyholders and their insurers. This will be especially true where there is a mismatch of information among companies, TXDoT and DPS.

The program is being implemented by a vendor that has experience with similar programs in other states. Presently the “implementation agencies” involved are examining the information being reported to determine the levels of mismatched data between insurers and the state. The match threshold is 95 percent and as of mid-September, of 198 companies that submitted data, 171 had match rates of 95 percent or above.

Melissa Burkhart, TDI’s FRVP coordinator, said companies not reaching a 95 percent match rate would be given 10 days to notify each policyholder of a mismatch involving their policy. The goal is to have policyholders provide the company with the corrected information to enable a match between the company’s data, and the data from DPS and TXDoT.

“If the VIN supplied by the carrier to the state does not match the data possessed by TXDoT or DPS, the software will go to work trying to match names, addresses and other identifying information on record,” explained Burkhart. The system will employ software capable of looking at several pieces of data to determine a match.

Along the insurance chain none would be more in touch with policyholders than the agent. It is not hard to imagine the companies turning to agents to assist in correcting wrong information. Agents would be well advised to make sure all information on policy applications and renewals is current and accurate, including names and addresses, as well as vehicle identification numbers (VINs).

The downside of inaccurate information is that a data mismatch preventing verification of financial responsibility discovered during a traffic stop is the business of the official making the stop. If a driver is stopped and presents an insurance ID card that doesn’t display his or her own name, or doesn’t match the exact vehicle description, or doesn’t match the computerized FR verification system, they very well may receive a ticket with the admonition, “Tell it to the judge.” Even worse, the really unfortunate ones will watch helplessly as the car is towed away.

Everyone knows a personal auto policy covers permissive users, don’t they? Not everyone, apparently, and these days even insurance agents may not know for sure. TDI has approved personal auto policies for some companies that only cover drivers listed on the policy, with no coverage provided for permissive users. Under the new program there will be a registration database, an insurance policy database and a paper ID card — none of which say anything about the poor soul who is pulled over for speeding.

IIAT has an idea: Change the ID card rules and the automated FR verification system to specify whether the policy covers permissive users. This could be done by adding an “Other Drivers Code” to the cards and the FRV data fields. Code 1: the policy covers permissive users; Code 2: the policy covers listed drivers only; Code 3: one or more persons are specifically excluded.

Other states’ experiences teach that a FR verification program is not a “cure all” for the uninsured motorist problem. While Texas legislation affects all vehicles, the FR verification program currently addresses only autos insured on a personal auto policy. This will most likely be temporary as TDI is working on developing a method to require inclusion of vehicles covered under a commercial policy.

So, just what is an agent to do?

Basically the agent’s role is whatever the agent’s company says it is. The insurance companies have the ultimate responsibility for compliance with the program, but they may ask agents to perform certain tasks, such as contacting insureds and policyholders to confirm correct information. Now is the time make sure policyholder information is correct.

And there is something else agents can do. It’s important for agents to make an effort to educate law enforcement personnel and judges in their communities — as well as consumers — about potential gaps in the electronic verification system to minimize unnecessary and unwarranted ticketing of properly insured vehicles.

David Surles is director of professional liability for the Independent Insurance Agents of Texas.

Topics Texas Auto Agencies