Despite the fact that nearly all states require auto insurance, nearly one in eight U.S. drivers doesn't carry it, according to the Insurance Research Council.
The percentage of uninsured drivers ranges from 4.5% to 26.7% across the U.S. States with the highest percentages include Florida, Mississippi, New Mexico, Michigan and Tennessee, which all report more than 20% of drivers go without insurance.
The alarming number of drivers without auto insurance should be a concern for all motorists. If a driver is involved in an accident where an uninsured motorist is at fault, they could end up paying expenses for physical damage and health care if they don't have uninsured motorist coverage. Since the average uninsured driver claim costs $20,000 before accounting for physical damage to the vehicle, drivers could find themselves with an expense they can't afford to pay.
What Is Causing the Rise in Uninsured Drivers?
The rise in uninsured drivers has become a trending topic in the insurance industry, as many companies are trying to understand the reasons for the increase. No matter the underlying cause, uninsured drivers don't see an immediate benefit from auto insurance, making it easy for them to go without coverage.
The most popular reason for the increase may be due to the rise in auto insurance premiums across the country.
In Tennessee, for instance, drivers pay $1,200 on average for car insurance. In Florida, the average cost is $1,830 per year. If drivers experience a rate increase larger than they can afford—due to a standard increase or after an accident—they may be more likely to forgo insurance, thinking the fine will cost less than the auto insurance premium.
Another reason may be the increase in drivers on the road. Humans are living longer, so they are also driving longer. With a larger number of drivers, there are more of them willing to take the risk of carrying no insurance. Drivers also might have trouble finding coverage options.
The number of auto accidents increased by approximately 230,000 from 2014 to 2015. If drivers have multiple incidents on their records, fewer insurance companies will be willing to offer coverage.
What Are States Doing to Fix It?
While 49 states mandate insurance, not all are equipped to enforce their laws. However, some states are making an effort to decrease the number of uninsured drivers on the road.
Ohio performs checks under its Random Selection Program. The Bureau of Motor Vehicles randomly selects 5,400 registered vehicles every week and requires drivers to show proof of insurance for a specific date. If a driver fails to show proof of insurance, their license is suspended until they can show proof.
Michigan, a state with high auto insurance rates, has introduced a number of bills in an effort to lower the required personal injury protection (PIP) coverage. Currently, PIP coverage in Michigan provides unlimited medical benefits to those injured in an accident. Some of the proposed bills would allow policyholders to choose their level of PIP protection and save 10% to 40% on PIP premiums.
Oklahoma is planning to use license plate scanners to identify vehicles that don't have insurance. The scanners compare license plate information to the insurance department's database. Any vehicles without insurance information will automatically receive a $184 citation in the mail.
In 2017, Mississippi implemented an electronic insurance verification program that quickly tells law enforcement officials whether drivers have insurance in place. The new system allows officers to request real-time verification directly from the auto insurance company. Those who don't have insurance risk losing their licenses and paying significant fines.
Maxime Rieman is Product Manager at ValuePenguin. Educating and assisting shoppers about financial products has been Rieman's focus, which led her to joining ValuePenguin, a consumer research and advice company based in New York. Previously, she was product marketing director at CoverWallet and launched the personal insurance team at NerdWallet.
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