Meeting the Challenge of Dept. of Motor Vehicles Reporting
Today, more than 20 states—and the number keeps rising—require insurance companies to report vehicle insurance information to their department of motor vehicles (DMV). The states want the information to enforce laws that require insurance on personal as well as commercial vehicles. Scofflaws are a big problem, as 14 percent of drivers are uninsured nationally, according to a recent Insurance Research Council study, with the rate varying from 32 percent in Colorado to 4 percent in Maine.
The onus falls squarely on insurers to provide states with the exact information they require—in an approved format and at the appropriate times. Companies that don’t comply with even the smallest details can be hit with stiff by-the-day fines. Data quality is a major issue with serious ramifications. If one of your properly insured customers is pulled over by the police for a routine check and his or her vehicle comes up as uninsured on the state’s database, the vehicle can be impounded on the spot. It’s not theoretical; it actually happens on a regular basis. Obviously, it doesn’t make for good customer or agent relations, and there’s the potential for public backlash when customers take their stories to the news media or elected officials.
Complying with this multi-state bureaucratic nightmare is extraordinarily difficult, because every state has different requirements. There is little standardization.
Seven states have adopted a translation language called X12, but this is of limited value because even these seven states require different items to be reported. Furthermore, some states, like Colorado, are driver based; others, like New York, are vehicle based. Each state has a unique layout for reporting this information. Some states track only personal vehicles; some, only commercial vehicles, and some track both. In New York, there are special requirements for reporting “for-hire” vehicles, such as taxis. Kentucky has authorized service areas for commercial drivers, who can’t legally drive outside their area.
States also require different reporting media, such as diskette, tape or file transfer protocol (FTP) on the Web. Some states allow paper reporting. While paper submission does allow insurers that can’t provide electronic reporting to remain in compliance, paper files are slow and error-prone.
The bottom line is that you’re virtually starting from scratch each time you enter a new state. When you start compounding the difficulty by adding multiple lines of coverage in multiple states, the task becomes dizzying. While it would be great for the industry if the states were to standardize their technical and business requirements, so far they show little interest in doing so.
Building in solutions
Since standardized regulatory nirvana isn’t on the horizon, insurers must control their own destiny. The best time to meet the challenge of DMV reporting is when the policy is issued. DMV reporting should be integrated with your policy processing system’s rating/issuance function, instead of having DMV information accessed after-the-fact by a separate extraction/reporting application. Integration makes the process “smaller,” more efficient and reduces the chances of errors.
Policy-processing system vendors can play a key role by ensuring that all their clients meet each state’s requirements. Your policy-processing system vendor should have the capability to manage the submission requirements of all states for all lines of business and to verify VINs, validate passenger and commercial vehicles and vouch for the accuracy of all data reported.
The vendor should also be able to produce auto ID cards at the same time, from the same set of information. Cost-effective systems are available that capture the information needed to rate and issue the policy, generate ID cards, verify VINs, and submit mandated DMV reporting that meets individual state requirements.
Vendors can provide these services several ways. The software can reside on the company’s system or be hosted as an ASP. DMV reporting is perfectly suited to outsourcing. There’s nothing strategic about DMV reporting, which can consume IT resources. An outsourced service must capture the DMV data from the company, send the proper transaction to the state and facilitate requests from the state for verifications and correction requests.
Handling DMV reporting properly doesn’t add to the bottom line, but doing it poorly can subtract from the bottom line. Outsourcing gets rid of the DMV headache and lets insurers focus on their core competencies of underwriting, marketing and providing first-rate claims service.
Dorrie Pighetti is vice president and chief insurance officer and Tony Reisz is senior vice president for the Hartford-Conn.-based Insurity (www.insurity.com). They can be reached at dorie.pighetti@Insurity.com and tony.reisz@Insurity.com, respectively.