Law Enforcement to be First Users of Texas’ Financial Responsibility System

A statewide system to verify that drivers in Texas have insured their vehicles to the extent required by law is in the process of being developed and is expected to go online in early 2008, according to one individual whose job it is to see that the program is successfully implemented and maintained. Texas law enforcement officers will be among the first to be able to access the Web based system to check during a routine traffic stop whether or not an automobile is insured.

Speaking at a meeting of the Central Texas CPCU Society chapter in Austin on April 24, 2007, Melissa Mallet with the Texas Department of Insurance explained that development of the Texas Financial Responsibility Verification Program was mandated under Senate Bill 1670, which passed the 79th Texas Legislature in 2005. The program is a joint project of the Texas Department of Insurance, the Texas Department of Public Safety (DPS), the Texas Department of Transportation (TXDoT), and the Texas Department of Information Resources.

The group of agencies working on the program are referred to as the implementing agencies. “As the lead agency, TDI’s duties include acting as the project and program manager and overseeing the development and continued successful operation of the program. At TDI, I am the main staff person working on it,” Mallett said.

About 33 other states have some type of financial responsibility program, so the process of developing a system for Texas began with an investigation into how other states’ systems operate.

“Once we had the program design and requirements gathered we issued a very extensive bid document, which was the biggest bid document that the Department of Insurance ever produced, and most complicated, as everyone kept telling me,” Mallett said. “With our second round of bids we got seven responses. We evaluated all of them closely, we had our top vendors come in and give us presentations.”

In November 2006 the contract was awarded to HDI Solutions Inc. (HDI), which currently operates a verification program in Alabama. HDI is partnering on the project with TransCore L.P., Insure-Rite Inc., and Verification Solutions (also called Verisolve), which have also developed similar database programs in other parts of the country, according to TDI.

Weekly reporting

Mallett said that on a weekly basis the vendor will receive data from TXDoT representing a “huge database of all the registered vehicles.” Also on a weekly basis they will receive driver’s license information from the Texas DPS. “And from every insurance company that is licensed to write personal auto in the state they will receive the full book of business once a week,” she said.

The reporting of commercial auto policies is not currently required by the program, but carriers who wish to may report those policies under the system. Mallett said there are a number of companies that have indicated they will be reporting commercial policies.

Using a “complex series of matching algorithms” the vendor’s database will be able to link every Texas registered vehicle to an insurance policy, Mallett said.

“They have it set up so that the information does not have to be 100 percent exactly the same for it to be a match, which we think is a huge advantage for this program,” Mallett said. “As you can imagine, my insurance information is probably not going to be a 100 percent match to my registration information.

“As an example, I recently got married and at some point my husband hopes I’ll change my name, and I’ll change it with my insurance company and I’ll probably go ahead and change it on my driver’s license. But I doubt that I’ll change it on my vehicle registration just because I’m lazy and there’s no point in doing that until my next renewal cycle.”

However, while her name may not match in all instances, such things as the vehicle identification number, the make and model, and the address will match. The program will reasonably be able to verify that the information links the right person and vehicle and insurance information, despite a name change.

The program will operate through a combination of an event based process and an ongoing verification process. The event based process, which will be implemented first, will allow the authorized users “to get accurate and timely insurance information on a given vehicle or driver upon request,” Mallett said.

Currently potential users include the Texas Law Enforcement Telecommunications Systems, TXDoT, the DPS’ driver’s license division and vehicle inspection stations.

Law enforcement is expected to be the first to use the event based process. For instance, during a routine traffic stop, an officer will be able to verify whether or not a vehicle is insured by entering the license plate number into the communications channel already in place in the patrol car. The system is “designed to work seamlessly with the current practices that a law enforcement officer does,” Mallett said.

If, for some reason, verification can’t be confirmed using the license plate number, the officer can still use the person’s driver’s license number and/or name to check the status of insurance coverage. On rare occasions, the vehicle identification number would be checked if the other methods can’t confirm an insurance policy is in place. However, officers will not be “calling in information from an insurance card because they don’t do that already,” she said.

Insurance companies are required to submit their data to the vendor by June 30, 2007. Some have already begun the process of working with the vendor to test transmissions, file layouts and data reliability. The program will undergo extensive testing before it is made available for use by law enforcement.

“We have decided that once the matching is up to 95 percent — which means 95 percent of insurance policies that are recorded are getting matched to a registered vehicle — then the program will be used. In a lot of states it has taken them a while to get to that but we are expecting to be there by January,” Mallett said.

Frequently asked questions

— Is personal information of insureds protected? Yes, data from insurance companies is encrypted before it is sent to the vendor, and anytime the vendor sends information electronically it, too, is encrypted. “We put a lot of security measures and requirements in our bid, and we required a lot of our vendor to keep safe all this personal information that is collected,” Mallett said.

— What is required of insurance agents? An agent’s role in the process depends on the relationship between the agents and the companies. Basically the agent’s role is whatever the agent’s company says it is. The insurance companies have the ultimate responsibility for compliance, but they may ask agents to perform certain tasks, such as contacting their insureds and policyholders to confirm correct information. Now is the time make sure policyholder information is correct. “As an agent your company may dictate to you that you work with the policyholder to get that corrected. … Your company is going to let you know what role you should be playing,” Mallet said.

— What vehicles have to be reported to this program? In Texas, the registration database maintained by TXDoT does not distinguish a personal auto from one used for commercial purposes. So, while not currently required, the program is asking that commercial auto policies be reported in addition to personal auto policies. Any vehicle subject to on-road use must meet financial responsibility requirements and should be reported to the program. “Even things such as a golf cart could be modified for on-road use so they might need to be reported. … There’s a different answer for everybody unfortunately. That’s something we’ll be working hard on during the testing phase, getting all of that figured out,” Mallett said.

— Do you still need to provide proof of insurance cards to your clients? Yes. This program does not change the law that requires paper proof of insurance.

— Where is the money coming from to pay for this program? A portion of the $1 fee on vehicle registrations that goes to the state highway fund is used to support the verification program.

More information on the FRVP is available online at www.tdi.state.tx.us/company/frvp.html.

Editor’s note: This article originally ran in the May 21, 2007, print edition of Insurance Journal – South Central Region.