Low Penalties Let People Off the Hook for Driving Uninsured

Dan McMullen is an insurance agent in Ferguson, Mo. His Solo Insurance office is on West Florissant Avenue, the epicenter of the trouble two years ago. The building next to his office burned into ruins.

There aren’t many millionaires among his clientele.

In the first six months of this year, more than 500 new customers walked into his office to buy auto insurance. By this month, 46 percent had lost coverage for failing to make payments, he says. That’s an improvement. His short-term dropout rate used to be over 50 percent.

It seems there are lots of people driving around the region without insurance.

In Missouri and Illinois, you need insurance to register a car. The law says drivers have to maintain coverage. But a driver can drop coverage after renewing license plates and drive around for the next two years. They will go penalty-free – unless they are pulled over by a cop or have an accident.

Even then, the fine for lacking insurance in Missouri is less than the cost of insuring a car.

“It’s a common problem. A lot of people don’t want to make their insurance payments,” said Larry Case, executive director of the Missouri Association of Insurance Agents.

The administration of Gov. Jay Nixon has no idea how many uninsured drivers are on the road in Missouri. The Missouri Department of Insurance used to track it by comparing the number of policies to the number of registered vehicles. In 1999, for instance, it estimated that 28 percent of drivers in St. Louis and 10 percent in St. Louis County were uninsured.

The insurance department no longer makes the effort, explaining that the results might be flawed. The Missouri Department of Revenue, which is charged with enforcing the mandatory insurance law, also seems clueless.

Illinois takes a sterner stand. The Illinois secretary of state sends 300,000 audit letters to randomly selected drivers requiring that they show proof of insurance or face suspension of their car registrations. That system shows a 4.5 percent uninsured rate as of 2014.

But it seems that uninsured motorists are more accident-prone than other drivers. Two years ago, the Insurance Research Council looked at claims from serious accidents, mainly those where people were hurt. In Missouri and Illinois, 13 percent of drivers in bad crashes were uninsured, a point higher than the national average.

In other words, there’s a 1 in 8 chance that a driver in a crash will have no coverage.

That’s a lot of crashes. Missouri tallied 6,345 reports of accidents involving uninsured motorists in 2015, according to the revenue department.

The cost of the uninsured

People hit by uninsured drivers can have a costly problem. Uninsured motorist coverage – which motorists are also required to carry – covers bodily injury. But most policies don’t cover property damage, and many motorists drop their own collision coverage on older cars.

Injured victims sometimes find that their bodily injury coverage under uninsured motorist has limits lower than their main policy.

Then there’s the cost of uninsured motorist coverage itself. It’s not a budget killer. State Farm, for instance, charges me $44 a year for $500,000 of uninsured motorist coverage on my 2012 Buick.

I could find no good research about who drives without insurance. But as McMullen’s experience shows in a poor-to-blue-collar neighborhood, it’s often due to financial stress.

California has a solution for that, and Missouri should adopt it, says Thomas Harvey, executive director of ArchCity Defenders, a civil rights law firm pushing for municipal courts reform in St. Louis. California requires insurers to offer cheap insurance – $250 to $500 per year – to low-income people driving older cars.

“They make a brand of insurance that it’s possible to pay,” he said.

Violations on a driving record can push insurance rates beyond reach. But that can also be a matter of poverty, Harvey says. Well-off people can hire lawyers who bargain down a moving violation into a lesser offense, usually in exchange for an outsized fine. Poor people take the hit on their record.

“You have to have sympathy for poor people. I get that,” said McMullen, the insurance agent. But that excuse goes just so far. “If you can afford to smoke, why can’t you pay to insure your car?” he asks.

Still, if you can’t pay both the rent and the car insurance, the car insurance will go. That’s not an irrational choice.

For instance, McMullen in April sold a policy for $161 a month to a 21-year-old woman covering a 1996 Jeep. She dropped the policy, and had an accident this month. If charged with driving without insurance, she’ll likely skate by with a fine much smaller than the insurance costs.

Missouri sets the maximum fine for driving without insurance at $300, rising to $500 in January. But what you actually pay depends on where you’re caught, and whether the judge is in a good mood. The fine is $175 under the uniform schedule adopted by most St. Louis County municipalities. It’s $225 in the city of St. Charles and St. Peters, according to court websites.

It’s also four points against the driver’s license. It normally takes 12 points to bring a license suspension, but the court can suspend the license until the driver shows proof of insurance and pays an extra $20.

Illinois is tougher, imposing a $500 fine and a mandatory license plate suspension.

Of course, a lot of uninsured drivers in accidents never get a ticket. Police don’t respond to every fender bender, and people who let their coverage drop still have their old insurance cards.

Bring back audits?

Illinois officials think their audit system is keeping its uninsured rate down.

“It’s motivation to maintain auto insurance. You never know when you will receive a questionnaire,” said Henry Haupt, spokesman for the secretary of state.

Missouri stopped doing audits in 2005, and McMullen blames that decision for a big rise in his nonpayment rate since then.

Why not do audits? Missouri revenue officials wouldn’t consent to an interview, and didn’t answer this question sent by email.

The nonpayment rate upsets insurance agents, who live on commissions, usually 6 to 10 percent of the premium. “If I write an auto policy, and you make one payment of $40, I make $4,” Case said.

Agents don’t like that, of course.

If the customer shows up again, the agent might demand half a year’s payment in advance.