DUI: high-risk driver
Auto insurance companies primarily set insurance premiums based on their assessment of how probable it is for the insured driver to file a claim due to an accident or other incident resulting in property damage or injury. While they use a large number of indicators to estimate the risk of insured customers, the most important factor is the driver’s driving record and behavior. Driving under the influence is one of the clearest and least ambiguous signal of irresponsible and risky driving behavior. A driver with a DUI on his or her driving record will almost certainly be tagged as a high-risk driver by most insurance companies.
High risk, high premium
High risk will result in higher premiums. Unless the driver was already in this category, he or she can almost certainly expect to see car insurance premiums to go up, sometimes significantly. Estimates for the expected bump range from 20-50% on average, based on the higher risk classification alone. However, as the assigned risk level is not the only potential change to insurance requirements, DUI drivers may have to face even steeper premium hikes.
The SR-22 requirement
Many states require drivers convicted of DUI to obtain an SR-22 insurance policy. SR-22 is an administrative form that laws of most US states mandate for DUI drivers’ insurance companies to file with the local Department of Motor Vehicles (DMV) as proof of adequate liability insurance coverage. SR-22 requirements typically stay in place for a minimum of 3 years after a DUI incident.
Some states have specific coverage level requirements for DUI drivers often forcing them to choose levels higher than they typically would. DUI drivers can be mandated to carry non-owner SR-22 liability insurance even if they do not own an automobile, but want to retain their driving privileges.
SR-22 laws may also require that the insurance company provide the DMV with timely updates on changes in the vehicle insurance policy. Most importantly, the DMV has to be notified of any cancellation immediately.
Overall, SR-22 insurance requirements can result in higher premiums above and beyond the high risk premium associated with the DUI incident. Not only do they flag DUI offenders clearly for insurance companies, but the increase administrative burdens on providers will translate into further rate hikes for the affected drivers. In Illinois for example, estimates that a DUI will increase annual premiums by $1,500 on average.
Some insurance companies outright decline coverage of DUI offenders. Some may do so due to the increased risk, while others are not set up to handle SR-22 liability coverage. In states where they are allowed to drop clients mid-coverage, a provider may decide to remit the prepaid premiums and cancel the policy in effect due to the drinking and driving incident. Other states forbid such practices forcing insurers to honor policies in effect and choose not to renew.
Dropped coverage on the insurance record can further increase future premiums as it is viewed as a negative signal by many insurers. Irrespective of the actual impact on the premium, coverage drop or non-renewal puts DUI drivers under increased stress and pressure to find a new provider to be able to stay on the road.
The impact of DUI on insurance may not be immediate, but more often than not, it will last for a long time. SR-22 requirements are typically enforced for 3 years, but the DUI on the driving record can stay visible to insurers for up to 5 or 7 years branding the affected driver ‘high-risk’.
It is also important that while a DUI driver may relocate to a different state, the insurance requirements for his or her liability insurance will continue to be governed by the insurance laws of the state where the DUI incident occurred. This means that the driver with an SR-22 insurance obligation will have to provide for that type of coverage in a new state that may not require SR-22 for DUI convictions. This could cause additional problems and yet higher premiums as insurers in such states typically offer no SR-22 coverage which can only be obtained at a higher cost and with a lot more effort.
The general experience confirmed by research is that a DUI does not always increase the premium. In the case of drivers insured continuously by the same company for a long time without incident, the insurer may not act on the first DUI incident.
In other cases, the insurance company may not learn about the DUI. Especially in states not requiring SR-22 liability insurance, a DUI may got unnoticed as insurers may only check records annually or even more infrequently. In addition, as many as ¼ of all driving convictions go unrecorded by the Departments of Motor Vehicles themselves. Offenses resulting in limited license suspension or erased through alternative means, such as driving school or course, may remain without an impact.
32% of road fatalities involved alcohol
However, it is not by chance that insurers and legislators demand higher premiums from drivers who are caught driving and drinking. According to 2009 statistics, 32% of road fatalities involved alcohol. The price that drivers, fellow-travelers and society pay for irresponsible driving behavior is simply too high. The increased insurance premiums forced on DUI drivers reflect not only their increased risk as drivers, but insurers’ and legislators’ attempt at imposing penalties that can act as strong incentives for them to avoid risky driving choices in the future.