in texas does insurance follow the car or the driver
AUSTIN — More than a million Texas drivers with limited auto insurance coverage face increased scrutiny under a new state law that aims to shine a light on policies that cover just one driver, not an entire vehicle car insurance quote named driver. A measure that the Legislature enacted and Gov. Rick Perry signed into law this year requires that insurers who sell “named driver” auto policies disclose the limits of the coverage to drivers. They must also list the names of covered drivers on insurance ID cards they issue to customers. Under such policies, often called “junk” policies, coverage is restricted to one person listed as the driver.
That means when family members other than the named driver use a family vehicle, they have no insurance protection. The policies are usually cheaper, but policyholders are sometimes unaware of the coverage limits. As a result, other motorists are at risk of being hit by an uninsured driver. House members tried to eliminate the policies outright, but the Senate balked. “We are seeing these policies pop up more and more across Texas,” said Alex Winslow of Texas Watch, a consumer group active in insurance issues. He pointed to Texas Department of Insurance figures estimating that there are more than 1.2 million named driver policies in the state.
The complaints typically center on the refusal of the insurer to pay for damage caused by a driver later disclaimed by the company. The daughter of the longtime chairman of the House Insurance Committee, Republican Rep. John Smithee of Amarillo, faced just that. Her car was rear-ended a couple of years ago by a motorist who provided proof of insurance at the scene of the accident. But when she contacted the man’s insurer, the company said the driver had no coverage under the policy.
The Panhandle lawmaker said the named driver policy has been one of the major loopholes in a state law that requires Texas motorists to carry insurance. He and most House members strongly supported a bill to bar sale of the policies. The House approved it on a 108-24 vote. But the measure died in a Senate committee.
The named driver legislation that did pass both chambers, written by Sen. Wendy Davis, D-Fort Worth, tightens up state regulation of the policies. It requires insurers to notify policyholders orally and in writing that the policy covers no one else in the household. Further, the limited protection must be clearly stated on the insurance ID form. And the measure would prohibit insurers from selling policies that do not include state-required minimum coverage. The new requirements must be in place as of Jan.
In the insurance policy that most Texans buy, liability coverage follows the vehicle. That means the vehicle is covered for damage caused to other drivers and vehicles, no matter who is at the wheel. Leading insurers generally don’t sell named driver policies. That gives an advantage to the smaller companies that do, as they undercut premiums charged by larger insurers such as State Firm. “Typically the driver gets a quote for insurance and it is usually high.
State complaint list Among the companies that sell a large number of the policies is Loya Insurance Co. It has ranked near the top of the state’s complaint list for major auto insurers for several years. In 2012, the complaint rate for Loya was more than twice the state average for auto insurance companies. Smithee and other supporters of the new law said a big advantage will be that police officers stopping a driver or responding to an accident will now know whether the driver is violating the law. The officer can issue a ticket or arrest the driver if there are multiple violations. “Right now it is difficult to tell the difference between a regular policy and a named driver policy by looking at an insurance ID card,” he said.
Mark Hanna of the Insurance Council of Texas, an industry trade group, said there has been a great deal of confusion surrounding the policies. That includes drivers who buy the policies as well as those hit by the drivers. “It’s a less expensive policy, and that’s why people buy it,” he said. “We’ve heard of many cases of drivers involved in horrific accidents who later discover that there is no insurance coverage because of one of these policies.” Smithee said some customers are trying to comply with the mandatory insurance requirement as cheaply as possible. But others don’t understand that their policies are limited.