Licenses for Migrant Drivers: Insurance Telematics Opportunity?
In a recent article, Patrick McGreevy, a contact reporter at the LA Times, said that giving migrant workers access to drivers’ licenses may result in more insured drivers. Translation? A huge infusion of new customers into a very competitive market. Let’s take a closer look.
Migrant workers can apply for drivers’ licenses in some areas.
Last January, California started accepting driver’s license applications from immigrants with illegal status. And California isn’t the only State where immigrants can get licensed. There are at least ten other regions with similar programs, including Washington, Illinois and District of Columbia.
Of course, this type of program was (and is) controversial. Advocates say it’ll help integrate immigrants into society while making the roads safer. Critics say it undermines national immigration law and poses security concerns.
But there’s another issue at play here – that’s how programs like California’s will impact the auto insurance market.
Illegal status, legal license: A formula for new customers?
While there’s no data to confirm it, common sense says that if a person has no driver’s license, chances are, they don’t have auto insurance, either. What’s less obvious is whether or not the inverse is also true: will immigrants go looking for auto insurance once they’re licensed to drive?
Assemblyman Luis Alejo, who wrote the law that allows California’s illegal immigrants to get licensed, said he expects “the vast majority” to comply with the law by seeking auto insurance.
That expectation is all the more likely since immigrant drivers are now eligible for a new, low-cost, State-approved insurance plan. But there’s a hitch. “Opponents of the new law … worry that the low-cost insurance plan won’t provide enough coverage for victims in major accidents,” McGreevy said.
Insurance telematics: Possibly the ideal insurance product for immigrant drivers.
One of the strengths of usage based insurance is its affordability. In fact, it may well be that usage based insurance offers a better value than the state-approved plan, offering better coverage for comparable rates.
UBI’s ability to serve low-income demographics is a product feature that we highlighted in a recent whitepaper: “UBI opens the door for those who haven’t been able to afford coverage, by offering reasonable rates that they can lower themselves with modifications to their behavior.” By demonstrating safe driving habits and logging fewer miles if possible, drivers have the power to lower their own premiums.
Immigrants who obtain licenses may be underserved by the traditional insurance model, and possibly by the state-approved plan as well. Could usage based insurance be their solution?
If so: insurers, take note. The California DMV anticipated that 1.4 million people would apply within the first three years in that state alone. In a competitive driver pool, opportunities like this can make a big splash.