Enforcement of Car Insurance Law Will Be Delayed 3 Months

Enforcement of the most sweeping provision of a tougher mandatory auto insurance law will be delayed for three months beyond its Jan. 1 legal start-up date, according to the head of the state Department of Motor Vehicles.

DMV Director Sally Reed said that until March 30 it is not feasible for her agency to begin requiring the state’s 26 million drivers to submit proof of having insurance when they apply for their annual vehicle registrations.

Reed explained that registration notices go out at least two months in advance, and the notices will not contain word of the requirement until the forms that are returnable at the end of March.

Meanwhile, a spokesman for the California Highway Patrol said that beginning Jan. 1, the agency will start enforcing another requirement of the law: that motorists supply proof of insurance whenever they are stopped for a traffic violation.

Auto insurance has been mandatory for years, but enforcement has been generally confined to drivers who had accidents.

The new law by then-Assemblywoman Jackie Speier (D-Burlingame) contains heavy penalties along with the reporting requirements.

Those not having proof of insurance when a law officer asks for it will have their licenses suspended and be subject to fines totaling more than $1,000. Those who do not submit proof along with their vehicle registrations will not have their cars registered.

The proof required with the registrations will be a copy of the insurance cards that companies issue to policyholders confirming that insurance is in force during a given period.

According to DMV estimates, 28% to 33% of the state’s motorists are uninsured. This means that 7.2 million to 8.6 million drivers will theoretically have to buy insurance for registrations due after March 30.

But controversy is already growing over the Speier law, which was originally opposed by the DMV and the state’s insurance industry, but was signed by Gov. Pete Wilson.

Leading industry lobbyists in Sacramento say similar laws in 27 other states have turned out to be unenforceable.

Speier said last week she feels that when her legislation is fully enforced, the costs of individual auto policies are bound to drop, because there will be little need for expensive uninsured motorist coverage on each existing policy.

But lobbyist Dan Dunmoyer of the Personal Insurance Federation said that in the other states it hasn’t worked out that way.

“These laws are not new,” said Dunmoyer. “Not one has lowered uninsured motorist rates.”

He said the problem is that the state required insurance is liability coverage and poorer people have few assets to protect. If they don’t carry it, they are hardly going to be sued because they have no assets to recover.

“Forcing people to buy a product they don’t need has only a short-term effect,” Dunmoyer said. “There has been an initial decline in the uninsured in other states, but then it has gone up again.”

He suggested that the number of unregistered drivers will go up because those who do not have proof of insurance are refused registrations. This will cause other law enforcement problems, he said, and he noted that the DMV is projecting a $20-million to $30-million decline in its registration receipts.

Lynnea Olsen, lobbyist for the Assn. of California Insurance Companies, agreed with Dunmoyer, saying that such a law “hasn’t been effective in a number of states, and we don’t see how it will be effective here.”

But Speier, now out of office and working in San Francisco, charged that neither the DMV nor the insurance companies are acting in good faith.

“This is a classic example of where you have a DMV and an insurance industry, both of which opposed the legislation, now whining about having to implement it,” she said in an interview. “It shows arrogance and disregard for the public.”

She said the DMV should have started implementation procedures as soon as it knew that the governor was going to sign the measure.

As for the companies, she said, “The costs associated with uninsured motorists in California are over $1.3 billion for those of us who comply with the law and carry insurance.”

Therefore, costs of policies should drop when the uninsured are insured, and it is up to the insurers to accept that, she said.

Reed responded: “This department is not whining about implementing the law. We are implementing it as soon as reasonably possible.

“We firmly believe that if we require documents from people when they re-register without warning them in advance, this will backfire, and that people like Ms. Speier would be even more frustrated with us.”

Reed added: “It is absolutely true we raised some concerns and did not support the bill at the time. However, it is our job to implement the bill now that the governor has signed it, and we will do so.”

The DMV director also suggested that perhaps the companies should transmit insurance information about drivers to the DMV electronically, rather than require motorists to submit it themselves.

But lobbyist Olsen rejected this approach, saying it would cost the companies millions of dollars, which they would in turn pass on to policyholders.

“At first blush, this is an attempt to the transfer the costs of implementation to the companies and their insureds,” she said of Reed’s proposal.