Electronic Proof of Insurance Becomes a Reality

Idaho has decided to allow electronic proof of insurance, and several other states are warming up to the concept. Find out what’s next on the insurance-goes-digital front.

Since we first posted this story, over half of U.S. states have legalized digital insurance ID. Check out the newest info on electronic proof of insurance.

Last year, we let you know that you couldn’t use your digital ID cards (accessible via Esurance Mobile) as legal proof of insurance.

But it looks like that could all change in the not-too-distant future. Good news for you!

Idaho has approved electronic proof of insurance

The great state of Idaho has stolen several other states’ thunder in becoming the first to approve digital proof of insurance. On March 28, Idaho governor Butch Otter signed a bill approving the use of digital insurance ID, whether provided through an app (like Esurance Mobile) or a PDF or image saved to the phone.

In fact, the bill’s actual wording (PDF) states:

The certificate or proof of liability insurance required by this section may be produced in either paper or electronic format. Acceptable electronic formats include display of electronic images on a cellular phone or any other type of portable electronic device.

The bill later defines a “portable electronic device” more clearly, as “a small, hand-held computing and communication device that has a display screen with touch input or a miniature keyboard.”

The new law goes into effect July 1 of this year.

Several other states are pushing for electronic insurance ID

According to the Property Casualty Insurers Association of America (PCI), the digital revolution is finally hitting the often-conservative world of insurance in a big, big way — and not just in Idaho.

Alabama’s next up with a law allowing motorists to electronically display proof of coverage both at registration and during traffic stops. This law will become official on January 1, 2013.

In truth, Colorado has the oldest regulations on the books, but their rule only allows for digital proof at registration, not during a traffic stop.

California and Arizona are joining the push too. Arizona’s HB 2677 merely awaits the governor’s approval, and the Golden State’s AB 1708 has received a few amendments and is currently under review by the Committee on Insurance.

Why the hesitation over smartphone insurance ID?

In a day and age where everything from books to board games to bank accounts have gone digital, many wonder why lawmakers have been so seemingly hesitant to join the Digital Revolution when it comes to insurance ID.

The answers are varied — almost as varied as their sources. One area of concern is reflected in the Property Casualty Insurers Association’s objection to an element of California’s bill that implies that an insurer has to provide proof of insurance digitally:

Notwithstanding any other provision of law, an insurer issuing policies of automobile liability insurance or motor vehicle liability insurance shall … promptly issue … verification as to the existence of that coverage, to a mobile electronic device.

Coming in the “mandates” section of the bill as it does, the language seems pretty clear, though its author, Assemblyman Mike Gatto, says that wasn’t its intent. (The aforementioned amendments to the bill don’t seem to address this concern. Lawyers?)

Others have pointed out logistical issues with such laws, asking …

“How will the insurer provide the digital proof of ID?”

Gatto has answered this by saying that the insurer won’t have to — customers could simply take a photo or upload a scanned version of their paper ID to their phone.

“How can the police officer determine the validity of electronic ID?”

The answer to this question is still up in the air. In many states, determination of validity is entirely up to the officer, with no method of verification immediately available. For instance, Michigan allows individual police officers to determine what constitutes valid proof of insurance. A review of online forums where police are active turned up several officers more than happy to accept digital proof.

A few states, on the other hand, have begun to address this issue and establish databases for law enforcement to verify insurance (as this page on the Texas Department of Insurance’s website shows). Hopefully, more states will follow Texas’s lead and stop relying on forge-able or outdated paper ID cards to verify insurance.

One last lingering concern comes not from the legal or actuarial side, but from drivers themselves. Many have expressed concerns about what rights you’re granting an officer if you hand them your smartphone or other mobile device. Will a police officer then have the right to browse through your text messages, browsing history, or other apps?

And looking at the text of these bills, it seems that’s one very smart question that has yet to be answered.

Weigh in!

What do you think? Is digital proof of insurance a godsend, an exploitable legal loophole, or a waste of legislators’ time and taxpayers’ money? Are you looking forward to using Esurance Mobile to provide proof of insurance? Let us know what you think.

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