Some car insurance companies anticipate a new golden market in new driving privileges. Even before the cards were available, these carriers found that the illegal driver segment is very profitable. The insurance companies experience good “retention,” meaning that the policies renew regularly. Just as important is the fact that illegal immigrants seldom report small accidents to lower the chances that they'll have a brush with the law. Companies like Progressive, Farmers Group, Bristol West, Infinity P&C and Alliance United have been putting a lot of effort into expanding this part of their book of business.
Even though many states deny driver's licenses to illegal immigrants, the law generally doesn't prevent insurers from selling insurance to unlicensed drivers and car owners. Companies like Progressive are already writing car insurance for illegal immigrant drivers and expect to sell more now that licenses are available to illegals.
However others are more cautious. Farmers Insurance Group of Companies, for example, is still taking a wait-and-see approach as to whether it will insure the new motorists, according to Robert Compan, the company’s government and industry affairs manager. He estimates it will take at least three years to figure out whether there’s a profit in the business.
“The law doesn’t mandate that we sell it,” said Compan, an executive board member for the Nevada Insurance Council, an educational and public policy arm of the industry.
“But if there’s a profit margin to be made, of course we’re going to sell it, but how do you rate it if they don’t have a driving history? How do you rate it if somebody doesn’t have a credit history? If we don’t know how they manage their daily lives, it could be difficult providing insurance.
“Normally, what we’ll do is take a look at the driving history and predicate the rates on that, but in this case it’s hard to rate somebody who doesn’t exist in the system,” he said.
Compounding the problem, Compan said, is that insurance is rated on a number of variables, and one of them is where the policy buyer lives, referred to as a “territorial rating.”
“How does one know where they live?” he asked. “A lot of people will falsify where they live, and insurance companies have gotten pretty savvy to it by asking for the utility companies in their name.”
In order for the new driving cards to be viable, insurance must be maintained and renewed along with the card and vehicle registration.