Insuring Illegal Immigrants Develops Into Auto Niche

Al Slavin, InsuranceNewsNet, August 23, 2010

It’s far from the only service that Fiesta Auto Insurance Co. provides.

Yet John Rost, founder and president of the growing full service agency business, considers the particular practice to be in the best interest of drivers everywhere.

He’s referring to writing auto insurance policies for illegal immigrants, despite their inability to legally obtain a state-issued driver’s license beforehand.

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The issue is framed within a larger ongoing political debate over immigration policy and can generate the same divisiveness. Rost pointed to the concern by some that issuing a driver’s license to those without immigration status will result in other benefits following suit.

There is also the social welfare debate about using immigration status as a prerequisite for selling auto insurance, and whether such a limitation might skew one’s chances of being hit by an uninsured motorist.

As history continues to show, a lack of insurance doesn’t necessarily keep illegal drivers off the road. Bob Hartwig, president of the Insurance Information Institute, said about 15% of drivers in the United States lack automobile insurance. {snip}

{snip} “Unless the law of the state forbids an insurer from selling the coverage to someone who is undocumented, then it’s likely there will be insurers and agents who are willing to service that market,” [said Hartwig].

In California, there is no state law that would prevent an insurer from selling an auto policy to a non-U.S. resident or an unlicensed driver, according to the state Department of Insurance. Carriers there can also write coverage for someone with a valid driver’s license from another country. In 1993, the state passed a law that required licensed drivers to establish proof of legal residency, well in advance of momentum that has built at the federal level.

{snip} Spurred along by Congress in 2005 there has been a push for states to require that applicants have established a “lawful presence” in the United States before being issued a license.

As of March 2007, 30 states have adopted the lawful presence standard established under Real ID initiative, according to Janice Kephart, director of national security policy at the Center for Immigration Studies. All but four states–Illinois, New Mexico, Utah and Washington–require driver license applicants to establish a lawful presence.

Rost said assisting illegal immigrants in obtaining auto coverage is a small component of his franchise-oriented agency. Rost started his auto insurance business in California with four offices in 1999 and his initial target was the under-served Hispanic and Latino market (BestWire, Jan. 22, 2010).

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Rost noted that establishing citizenship isn’t necessarily a requirement for purchasing or registering a car, something confirmed by the American Association of Motor Vehicle Insurers.

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