Driving Without Car Insurance In NC Might Soon Cost You Your Car

A bill, recently introduced in the NC House of Representatives by Representative George Cleveland, referred to as house bill 602, proposes to confiscate uninsured vehicles operating on NC highways. Cleveland is frustrated with the number of uninsured drivers on our highways and wants to step up the costs of noncompliance to get drivers’ attention.  If passed into law, then these rules would take effect December 1 2013.

In NC car owners cannot renew their license plates without first proving insurance is in place on the car associated with that tag.  However, once past this hurdle, some insurance policies are later cancelled while the driver continues to operate that vehicle on the highways.  The NC State Highway Patrol issued 24,436 citations last year to drivers without insurance.  Some estimates put the number of uninsured drivers on our highways as high as 15% of the total of all vehicles on the road.

As an aside, when I first became an insurance agent in the early 1980’s, uninsured motorists insurance coverage cost the average driver about $3 per year per car.  Now, that number has skyrocketed to nearly $150 per vehicle.  Part of this explosive increase in costs has been related to the introduction in the mid 1980’s of underinsured motorists coverage, but there is no doubt that the costs of uninsured drivers in our state is something that everyone who buys insurance here has to bear. 

The bill says that the confiscated vehicle will be placed under the possession of the sheriff of the county in which the violation occurred.  It goes on further to state that the sheriff shall restore the motor vehicle to the owner, only after proof of insurance is obtained.  In addition, this bill would require the owner to pay the sheriff for costs actually incurred by the sheriff towing, processing, and storing the vehicle.  There is no mention of limitations on these fees and expenses so we could see widely differing costs for uninsured motorists from one county to the next.

One other area of consideration in this bill deals with the rights of the lienholders to a confiscated vehicle.  After all, they actually hold title to the car until the loan is paid off.  Section 3 says that the lienholder may petition the court to reclaim the vehicle for sale to satisfy the lien.  The allowance of this reclamation is up to the discretion of the court however and if the vehicle is returned to the lienholder then that party has to return to the state any proceeds of the sale over and above the balance remaining on the loan on that vehicle. 

This bill is a drastic measure and may seem a bit heavy handed but there are some additional provisions in the bill that will soften the blow for some violators.  There are exceptions that can be made for technical errors that may have led to a lapse in insurance coverage.  Also, there is a grace period that allows the driver to obtain insurance in order to avoid the vehicle being sold by the state though during that time they will not have access to their vehicle.  I think it is clear that the state of North Carolina would rather not get into the used car or car auction business so they will hope that most people will purchase insurance right away to get their car out of the impound lot.  But I think it is a useful consideration that a violator that has no insurance is not allowed to just drive off from the traffic stop and endanger others with no means of paying for the accident that he or she may cause.

You have to believe that if the bill does become law, and if its successfully force more uninsured drivers to purchase insurance on their vehicles, then over time the rest of us will see reduced uninsured motorists insurance rates.  And that is only fair.

At Clinard Insurance Group, located in Winston Salem, NC, we help thousands of families each year with their NC auto insurance.  We would love to help answer any questions you may have about this or your home insurance.  We can also help you with your life insurance and business insurance, so feel free to give us a call today at 877-687-7557.

NC Auto Insurance Modernization Act – An Interestingly Political Fix

Right now there is a bill that is under debate in the NC House of Representatives.  This bill attempts the change the way that auto insurance rates in NC are made, allowing each insurance company to come up with their own rates as opposed to the current system of having the NC Rate Bureau propose maximum rates to the insurance commissioner for approval or denial.  This bill, called House Bill 265, in my opinion, is a step in the right direction and would allow for more of a free market approach to rate making but also includes some proposed changes that might generate huge problems for the auto insurance consumer down the road.  And I am left wondering why our legislature is working so hard to fix our auto insurance system that is stable and competitive, while ignoring the exact same rate making problems for home insurance that is actually causing homeowners in our state such difficulty when they try and buy or even renew home insurance.  Trying hard to fix something that isn’t broken while ignoring a crisis going on around them must just be a talent found only in politicians.

House Bill 265 has at its heart a more free market approach to auto insurance rate making in North Carolina.  And I can certainly support that.  Currently our system of rate making is a two-step process.  First of all, the NC Rate Bureau, an entity owned and supported by all of the insurance companies that do business in our state, proposes maximum rates that could be charged for auto insurance.    These proposed maximum rates are sent to the insurance commissioner who can approve them or partially approve them or even modify them or reject them entirely.  Ultimately then, the insurance companies can charge the maximum rates, or provide discounts from these rates to charge something below the maximum rate.  This works just fine as long as the maximum rates are nowhere near the break even point for the insurance company on that kind of insurance.  In auto insurance the rate that you pay is almost certainly somewhere far below the maximum.  But with home insurance in NC right now, the maximum rates are just too low for most insurance companies to make money.  And if they can’t make money then they leave or they start trying to find ways to reduce coverage.  And getting a rate increase out of an elected commissioner during an election year is nearly impossible.  So the current system can hamstring itself sometimes. 

Right now, the NC, our homeowners insurance marketplace is in crisis. Weather related losses have left insurance companies losing money on home insurance.  Rates have been held down by the insurance commissioner and some insurance companies have left the state entirely while others are cancelling huge blocks of homeowners policies from their books.   To prove a point regarding which rate making process should actually be under the legislature’s wish list for change,  a homeowner in NC will find it very difficult to buy home insurance in North Carolina without also purchasing auto insurance from that same insurance company.  Why?  Well because the insurance company knows that it will make money on the auto while losing it on the home insurance.    

I can support the portion of this bill that allows insurance companies to make their own rates, whatever they may be, for North Carolina Auto Insurance.  I trust that a free and open rate making marketplace will probably generate much better results for all consumers than will one that is dependent on the political will of an elected insurance commissioner.  But I have one huge concern with this new bill.  The current wording would allow insurance companies to develop their own coverage forms for auto insurance.  This could be a huge change from our current law which requires all insurance companies to sell the same auto insurance form.  Differing policy forms could make comparing one auto policy to another unreasonably complicated for the average consumer.  Apples to apples quotes will be a thing of the past, though the real problem could be that most consumers may not realize this.  The dark side of this kind of change is that at least some auto insurance buyers will purchase their insurance based solely on the lowest price offered.  This might mean that they don’t have the protection that they need after an accident happens.  I have been advised by some insurance company personnel that in the states where differing policies are allowed, most insurance companies tend to sell the same basic coverage to everyone.  So this may not be a big concern though the risk to the consumer seems pretty large from my perspective.

There is also one other possible bad consequence of this legislation.   This bill would make insurance company membership into the NC Rate Bureau voluntary.  Might this mean that the large auto only insurance companies would leave the bureau and as a result leave this organization without the funding that it needs to survive?  And if this happens, what then will become of our home insurance market which is currently in crisis due to rates that are too low?  Might  this deepen the homeowners insurance crisis in NC?  These are questions for which I can find no concrete answers.

At Clinard Insurance Group, located in gorgeous Winston Salem, NC, we work hard to help all insurance buyers become informed consumers.  We currently insure thousands of families all across NC and we can help you with any of your insurance needs from home insurance and auto insurance to business insurance or life insurance.  Give us a call, toll free, at 877-687-7557 and we will be happy to put our expertise to work for you to help you find the coverage you want and need at the lowest possible price.