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Undercurrents: Auto Insurance Falls Short in Coverage

A regular Source feature, Undercurrents explores issues, ideas and events as they develop beneath the surface in the Virgin Islands community.

There are 65,000 registered drivers in the territory, according to the Bureau of Motor Vehicles.

Despite the mandatory insurance law, up to 20 percent of them, maybe more, are uninsured, according to estimates from some industry representatives. And virtually all of them are underinsured.

First a disclosure: Several months ago this reporter was in an auto accident; the other driver was deemed at fault and his insurance company was quick to process the claim and ready to release the full amount of coverage for property damage and medical expenses. The only problem is the full amount wasn’t full enough. It fell a few thousand dollars short of covering the medical expenses for what was a serious, but far from catastrophic, injury. It also raised the question of what is adequate coverage.

Mandatory Minimums

Commonly known as 10-20-10, the minimum liability coverage required for noncommercial drivers in the territory provides up to $10,000 in property damage per accident, and a total of $20,000 in medical expenses, but not more than $10,000 in medical expenses for any one individual.

The minimum requirements for commercial vehicles, including smaller taxis, are the same except that the cap on medical expenses for all injured in a single accident is $25,000 instead of $20,000. For taxis designed to carry more than 11 passengers, the total medical cap is $50,000, but still $10,000 per person.

Those minimums were set in 1975, when the mandatory insurance law first went into effect. The law was repealed and reinstated since then, but the 10-20-10 allocation hasn’t changed.

It’s hard to find any other commodity that hasn’t risen in price in nearly 40 years.

The national average cost for a loaf of bread was 50 cents in 1980. By 2008 it was $2.79. That’s according to a website called The People History. The site lists the average price for a new car as $7,200 in 1980 and $27,958 in 2008. A new home cost an average of $68,700 in 1980 and $238,880 in 2008.

Attempts to get cost comparisons specific to the Virgin Islands were unsuccessful, but presumably the differentials are similar.

Medical costs are so variable that historic comparisons for specific procedures or services are problematic, but there is universal acknowledgment that costs have been rising steadily and dramatically for decades.

A 2012 report by the Primer-Kaiser Family Foundation shows an increase in medical spending per person in the United States from $1,110 in 1980 to $8,402 in 2010. Most of the increase is attributed not to expanded coverage but rather directly to the rise in charges for services.

The 10-20-10 formula falls short at 2013 prices, according to Mark Robertson, president and branch manger of Theodore Tunick and Co. Insurance.

“It’s too low,” he said. “Even if you think of a minimal accident, to rack up $10,000 in medical expenses that’s easily done.”

Yet there’s no move in the industry to advocate for a raise in the minimums.

If there were, Robertson said, “I expect there’d be a tremendous push back.” That’s because coverage is driven by what the customer can afford and “people are squeezed with WAPA bills and everything else” and don’t feel they can afford more insurance.

Raymond Fournier, president of Guardian Insurance, concurred that many people couldn’t afford higher coverage. He added another reason for not increasing the mandatory minimums is that it will promote litigation. “There will be more lawyers to go after the higher limits.”

Warner Bowers, who said his insurance career in the Virgin Islands started in 1984, put it this way: “The limits go up, the lawsuits go up. So insurance companies do not want to write higher limits.”

Skirting the law

All of them agreed the bigger problem facing the industry is noncompliance with the law as it exists.

Robertson said, based on the number of insurance cancellations his company sees, the number of uninsured drivers is significant, but he was reluctant to give an estimate.

“That would be a shot in the dark,” he said, but added, “if someone had proof of 10 percent, that wouldn’t surprise me.”

Fournier believes it is far higher. In other U.S. jurisdictions, it typically runs about 5 percent, he said. Here in the territory, he thinks it is “easily, easily” 20 percent or even 30 percent.

Like Robertson, Fournier is basing his estimate on the numbers of cancellations within his company, and his company writes “a good share of the market,” he said.

The law has safeguards in place in an attempt to ensure compliance. You can’t register your vehicle without showing proof of insurance. You can’t cancel your insurance without proof that you sold the vehicle to a new owner who has insurance coverage for it or that you have disposed of it and have canceled your registration so the vehicle may no longer operate on island roads.

But people find ways around those safeguards.

One is timing the registration to take advantage of a former owner’s insurance.

“One of my pet peeves,” said Myrna George, assistant director of the Bureau of Motor Vehicles, “is even if the insurance expires a day after registration, I have to register (the vehicle) for a full year.”

More common, say the industry experts, is financing the cost of the annual insurance, making the initial payment and then defaulting on the loan.

When that happens, the insurance company cancels the policy for nonpayment and notifies the bureau. Fournier said his company sends weekly reports that list all cancellations.

The information is meant to be uploaded into a government computer system where it’s available to police, so if a driver is stopped for any reason, the police know whether or not his insurance is valid.

Some officers will check and will cite such drivers, Fournier said. But in some instances – even in some accidents – the uninsured motorist is not cited. “It happens all the time,” he said.

It’s unclear whether the failure is because the information isn’t in the system or because the officer failed to check it. Voice and email messages left last week for Police spokeswoman Melody Rames seeking comment were not returned.

But other government officials indicated they are aware of the problem and blame a lack of communication for it – at least in part.

“Everyone needs to be on the same page,” said Shawna Richards, spokeswoman for the Lieutenant Governor’s Office which oversees the Division of Banking and Insurance. “There just is not a strong mechanism in place” to address the issue.

George said it can take two weeks or even a month to get and post updated insurance information. “I would like to see it instantaneously done.”

She did predict improvement.

“Within the next six months,” she said, a new system should be in place which will mean full connectivity among the Motor Vehicle offices on all three islands, the Superior Court and the Police Department.

Meanwhile if you are unlucky enough to be hit by a driver who is uninsured – or underinsured – you may need to look to your own insurance for compensation.

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