Auto insurance requirements imposed by the states

Sometimes, people forget that the USA is a federation of sovereign states. So, although there’s always a role for the federal government when it comes to obvious national interests like defense, most of the day-to-day law-making and regulation gets done by your local state’s capital. In this, auto insurance is exactly the same as most other products and services offered for sale. The local state decided what degree of consumer protection is appropriate and the level of enforcement required.

Every state has a Commissioner who’s responsible for regulating insurance within state borders. From this you will understand that each insurance company is licensed to sell policies state by state. No company can sell policies across state lines. This leaves the Commissioner with whatever power has been allowed by the state government. Some states have highly regulated markets with the Commissioner deciding the range of policies that can be sold and setting limits on the power of companies to limit or exclude risks. Most Commissioners also actively police the insurers, responding to consumer complaints. A few have the power to refuse an insurer’s request to increase premium rates.

You should do a google search to find the website of your local state’s Commissioner. There’s always a wealth of information about the local insurance market. The most important step is establishing exactly what your state’s mandatory requirements are. You will also find useful information about how to complain if you feel you have been the victim of misselling or an insurer is wrongly refusing a claim.

Although some aspects of the laws affecting coverage are expressed as mandatory, you also need to look carefully at your state’s policy on enforcement. In some states, there’s little will to enforce them vigorously. The politics seem to be that, in many cases, the mandatory nature of the laws makes the premiums look like a tax on the poor. At a time when there is high unemployment, elected representatives feel under pressure to reassure voters. With budget deficits high, there’s little money available to police forces to catch more of the uninsured. This means there’s a rising percentage of uninsured drivers on the roads. In some states, it’s approaching 20% of the vehicles on the road. The risk of being in a collision with an uninsured or underinsured driver is therefore high. You may therefore think it good value to buy uninsured driver coverage depending on where you live.