In California, a new law allowing undocumented residents to apply for driver's licenses is raising questions about the impact on auto insurance rates in the Golden State.
In 2013, Gov. Jerry Brown signed a law -- dubbed AB 60 (after Assembly Bill 60) -- that allows anyone to apply for a license so long as they show proof of identity and
Applicants also have to pass the standard driver's license tests, including a behind-the-wheel exam.
What effect will AB 60 have on car insurance?
The new law went into effect in January. Nobody knows how many people will apply for licenses, but the Department of Motor Vehicles predicts it will process 1.4 million additional driver's license applications in the first three years of the program.
Through the end of January, more than 59,000 licenses had been issued to 236,000 applicants under AB 60, according to the California DMV.
Proponents say the new law will benefit all
"Having fewer uninsured drivers on the roads is always in the public's interest," says Mark Sektnan, president of the Association of California Insurance Companies.
In addition, the law's supporters believe it will promote safety because drivers will have to pass a driving exam.
But the move also raises questions about how the new law will affect auto insurance in the state.
But the measure is especially far-reaching in
Will newly licensed drivers get insurance?
Some critics have voiced concerns that many undocumented residents who obtain driver's licenses won't purchase auto insurance, despite the fact that it's required by law.
The new law doesn’t require people applying for licenses to show proof of insurance, although Sektnan says the DMV electronically verifies a driver's insurance coverage during the vehicle registration process.
California recently instituted a new low-cost insurance plan that makes coverage more affordable for people who meet certain income requirements, "regardless of immigration status," according to the program's website.
Policies are sold by licensed insurance producers and issued by licensed insurance companies. Applicants can begin the process at the program's website or by calling 877-401-9550.
To be eligible, a single person must have an income of no more than $29,425.
"Many undocumented residents have already been purchasing auto insurance," Sektnan says. "This bill wil encourage more people to have insurance."
"The number of new immigrant drivers is likely to be small, and many of them will purchase insurance," she says.
New Mexico: A case study
A study by
The Rocky Mountain Insurance Information Association (RMIIA) represents insurers in three states --
Carole Walker, RMIIA executive director, says insurers in those states determine and rate risk on an individual basis. In addition, drivers who register their vehicle must provide proof of insurance.
"There has been no direct evidence in Colorado, New Mexico or Utah that issuing immigrant licenses adds to the uninsured motorist problem or higher premiums," Walker says.
Will car insurance rates change?
Ruiz doubts that the new law will have much impact on insurance rates. She says many of the undocumented residents who are applying for licenses already are drivers, and that insurance companies have factored their claims histories into their overall rate-setting formulas.
Sektnan says it's too early to know how the new law will affect insurance premiums across the state.
He adds that the California Department of Insurance will have to review any changes in an insurer's rating plan before the insurer can charge new premiums.
Overall, having more drivers insured is always a good thing, Sektnan says.
"There will be fewer accidents where one party who may cause the accident doesn't have coverage," he says.
"Providing legal driver's licenses for those who may have been previously driving unlicensed and without insurance will hopefully result in more drivers obtaining insurance," she says.
However, if you're concerned there will be a spike in uninsured drivers on the road, you can protect yourself by ensuring you have uninsured motorist coverage.
"(This helps) ensure that you're covered if you're hit by a driver without insurance, or enough insurance,"