RENO, NV - With the roll-out of the new Driver Authorization Cards which allow undocumented people to drive legally on Nevada's roads, many people speculated the cost of auto insurance could start to decline.
But insurance experts say it is going to take some time before we can really determine how the cards will affect rates.
More than 500 Driver Authorization Cards have been issued in the state since Senate Bill 303 went into effect at the start of the month.
Part of the selling point of the cards was that applicants had to purchase insurance if they wanted to register a car, and more insured drivers would then translate into lower insurance rates.
Currently, the average annual premium for auto insurance in Nevada is $1,341 according to Insure.com.
But Robert Compan with the Nevada Insurance Council says it's too early to tell if that number will go down.
"Ask me that in 6 months, I may have a better answer for you," he said.
Every motorist in Nevada is required to carry auto liability insurance. The minimum amount of liability insurance that satisfies financial responsibility law requirements is known as the 15/30/10 rule:
$15,000 for any one person killed or injured in an accident caused by the policyholder;
$30,000 as a total limit for all persons killed or injured in an accident;
$10,000 for property damage caused in the accident.
While SB 303 requires Driver Authorization Card holders to purchase insurance, that doesn't mean undocumented drivers weren't buying it before.
"Some companies will offer insurance without a drivers license," Compan said. "They'll insure the vehicle. They're not insuring the person."
These companies will use a person's credit history to determine rates instead of driver history which most insurance companies use to set rates for those with a traditional license. But Compan says these "sub-standard" companies are not going to be the top insurance players who can offer the most comprehensive coverage.
Now with these cards, undocumented drivers can establish driving history and reasonably shop for insurance coverage with the major companies. But one problem is some of the major insurance companies are still writing their policies on how to handle the influx of drivers who don't have a driving history.
"There's a pretty good chance that it's going to be a little bit higher than your average insurance policy," Compan said in regards to what DAC holders might pay.
State Farm Insurance spokesman Victor Hugo Rodriguez said in a written statement, "Any person who is granted driving privileges in Nevada under the new law's provisions and applies for State Farm auto insurance will be considered under our normal underwriting criteria." The company declined to go into any other details.
But Compan said, these major insurance companies may look to Utah to help determine rates. Utah passed a law in 2005 allowing for Driver Privilege Cards. A study released three years later showed that 76% of those with Driver Privilege Cards purchased insurance. That is compared to the 82% of drivers with traditional licenses.
As more undocumented drivers receive their authorization cards, Compan says, where we could see a decline in auto insurance rates is with uninsured motorist coverage.
"I think down the line maybe uninsured/under insured motorist coverage could go down, because with more insured drivers on the road, we may see a decline in uninsured driver claims."
According to data from the Insurance Research Council, about 13% of drivers in Nevada with a traditional license do not have insurance. In Nevada, drivers have the option of purchasing uninsured/under insured motorist coverage. This added coverage will pay for bodily injury inflicted on you by another during an auto accident. It will not; however, cover property damage.
Compan also send a warning to those who may be shopping for insurance. This could be a prime time from scammers to try and sell phony policies to unsuspecting drivers. He says they will try to sell customers fake insurance cards or some may claim to offer a rate far below the average.
"If you're getting a bunch of quotes in the same price range, and then there's one way under, that may be a warning sign," he said.
Compan suggests contacting the Nevada Division of Insurance or the Better Business Bureau if you have a suspicion that the person or company you may be dealing with is less than reputable.