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March 2016

Online Insurance Verification offers real-time evidence of insurance

Many drivers have been there: They get pulled over, but can’t seem to find their evidence of insurance card. This leads to an extra ticket being issued and time wasted for everyone involved, including law enforcement and the court system. Fortunately, some jurisdictions are finding a solution to this problem—Online Insurance Verification (OLV).

OLV is a program that gives motor vehicle administrators or law enforcement officers a real-time look at whether or not someone has insurance at the time of the transaction or roadside stop, or at the time they’re performing an audit check to make sure the person is maintaining insurance. It provides them with better data than a piece of paper that may have been printed up to six months or a year ago.

Because OLV is Web-based, authorized requesters from a jurisdiction’s law enforcement, motor vehicle department or court system can search for a driver’s evidence of insurance via a database and receive that information from insurance companies in seconds. Ten U.S. states currently utilize OLV, and four more are in the process of implementing the system. See the sidebar below. 

Making OLV a Reality

In a majority of the states, all drivers are required to have liability insurance and evidence of insurance in their vehicles. Reporting programs designed to enforce insurance laws have been regarded as costly, difficult to implement, hard to maintain and a burden for insured drivers. So the Insurance Industry Committee on Motor Vehicle Administration

(IICMVA), which is an all-industry advisory group that serves as the official liaison between the insurance industry and motor vehicle departments in the United States and Canada, wanted to explore Web service technology to verify insurance coverage, which led to OLV.

A jurisdiction’s OLV generally follows the IICMVA standards and specifications, and in some cases, such as in Texas, a proprietary system can be put in place.

“We evaluated the programs available and determined that none of those met all of our needs, so we established our own system,” says Ben Gonzalez, spokesperson for the Texas Department of Insurance (TDI).

In order to make OLV a reality, jurisdictions can either contract with a vendor that provides IT and other services for them, or develop their own systems that can communicate with authorized insurance companies. When creating its unique system called TexasSure, the TDI researched other state programs and evaluated their designs and success rates, Gonzalez says.

“We also established a working group with insurance company representatives to learn about their experiences in other states and their reporting capabilities and limitations,” Gonzalez adds. “Next, we evaluated our requirements and developed the design to implement for Texas. Some specific items we considered were the frequency of reporting, the availability of the system and the amount of data needed from insurance companies. During the development, testing and implementation process, we had regular conference calls with the insurance companies and the vendor to resolve any technical questions and issues.”

In Alabama, another state with an OLV system, Legislative Act 2011-688 was passed, requiring the Alabama Department of Revenue to create an Online Insurance Verification System (OIVS). The act also created a 13-member insurance advisory council to facilitate the implementation of the OIVS, says Sherry Helms, registration manager, Alabama Motor Vehicle Division.

“The council assisted in the development of a detailed guide for insurers that provides a descriptive explanation of the insurance verification process and technical specifications for insurers to be in compliance with the law,” Helms says. “The council outlined the testing phase for the OIVS and identified any changes that needed to be made during the testing phase.”

Vendors registered with the Alabama Department of Finance–Purchasing Division presented their OIVS solutions to the advisory council, Helms says. The council recommended that the department work with the University of Alabama to implement OIVS, and the university now handles IT needs related to the system.

Alabama’s OIVS pilot program ran for nine months, during which testing with pilot insurers and license plate issuing officials and their vendors was done, and details regarding user guides and data transfers were smoothed out. While Alabama is just one example of OLV implementation, and each jurisdiction will follow its own processes, Helms has a few key words of advice for development.

“Establishing an advisory council ensures that all parties affected by the implementation of [OLV] are communicating and working together to develop solutions to address any concerns with the implementation or system, and to determine enhancements needed to the process,” she says. “We would also recommend a 12-month implementation period to allow all parties time to be able to fully implement the Web services needed for [OLV].”

Once OLV is established, providing error reports back to insurers assists them with identifying issues within their systems and determining how to address them, Helms adds.

Benefits of OLV

According to Casey Garber, manager of Vehicle Programs at AAMVA, the benefits of Online Insurance Verification are threefold: The system saves time, money and cuts down on fraud.

Drivers do not need to worry about being issued a ticket and going to court; law enforcement does not need to issue the ticket and complete unnecessary paperwork; and the court system does not need to get involved.

“And there is the added benefit of being able to check it on a regular basis,” Garber says. “If some states are checking it monthly, they can make sure that the insurance is maintained versus people dropping their insurance once they get registration.”

Helms says her jurisdiction has noticed immediate benefits. “A response is returned from insurers in less than one second to confirm that vehicles are properly insured, or to indicate when evidence of insurance would be required from the registrant to an authorized requester,” she says. “Cases of fraudulent insurance identification cards have been found because the National Association of Insurance Carriers (NAIC) number used was not a valid insurer number.”

In Texas, the TexasSure database has been able to provide all 254 county tax assessor-collectors and Texas law enforcement with updated insurance verification statuses since 2008, says Gonzalez. This enabled the state to crack down on the number of uninsured vehicles.

“Soon after its launch, the database showed that statewide 24 percent of Texas registered vehicles could not be matched to an insurance policy. In August 2015, 11 percent of Texas registered vehicles could not be matched,” Gonzalez says.

OLV is relatively inexpensive to implement and is a comprehensive solution that could replace less effective methods of insurance verification currently in use. With the continuing advancement of Web services and technology, printed automobile insurance just might become a thing of the past.