Can International, Foreign, Or Mexican Matricula Operators Obtain Auto Insurance?

There are several insurance carriers in the marketplace that compete among each others to get the consumer money. Each of these insurers sets its target markets, or the classes of clients that this company has an appetite for. Then a pricing strategy is derived based on insurer's experiences in the marketplace, and competitive forces.

In the world of business insurance, some insurance carriers may have certain appetite for insuring auto service business, or perhaps used car dealers, for instance. Companies that have appetite for certain class of business make less stringent requirements for issuing (underwriting) policies covering those classes of business, and may also cut their rates to attract more customers. The same thing could be stated about the car insurance companies. Each company has changing appetites for certain classes of customers (ie suburban vs urban, youthful vs mature, married vs singles, etc.)

The Chicago area is a good example of markets where you see fierce competition among insurers. Besides its huge population, the Chicago area is known to have large number of undocumented aliens, unlicensed operators, operators with foreign or international licenses, and operators who still drive on permits. An interesting phenomenon pertaining the auto insurance business in the Chicago area is that some companies offer lower auto insurance premium for unlicensed individuals, including people with permit. This means that a 30 year old married man without a US license can get cheaper insurance premium than a 30 year old married US licensed man (assuming everything else is the same!!)

Not all insurance carriers will accept un-licensed drivers or international drivers or drivers with foreign licenses. A decade ago, there were very few companies that would take international licensees for auto insurance. Now, there are lots of insurance companies in the Chicago area alone (mostly non standard) that will insure those operators, including the ones that have permits only. Some standard and preferred companies have established special programs to target this market.

The wisdom behind insurance companies accepting those people is very simple. Insurance is a social need. The fact that someone does not have a US license cannot be interpreted that they constitute serious hazard to other motorists on the roads. Some companies, especially the standard companies, will surcharge their auto insurance rates, perhaps 20% more or less compared with their licensed counterparts. Companies that extra charge these policies argue that since there is no way to examine the motor vehicle report (MVR) for those people, they can be posing higher risk than other drivers whose driving record is available.

Other companies (mostly non standard) that offer lower auto insurance premiums for the unlicensed/ foreign or international licensed operators look at the matter differently. Unlicensed (including operators with permit), foreign licensed, and international licensees may be less hazardous on the road than their US licensed counterparts. The rationale behind this is the concept of "morale and moral risks" involved in the insurance business. Moral hazard refers to the situation where the risk from purchasing a policy is higher because of bad faith, hence insured may commit unethical acts such as exaggerating (or even fabricating) their claims.

Morale hazard, on the other hand, refers to the psychological state of indifference which creates some sort of negligence (or recklessness) because people with insurance feel that things will be OK (its ok to speed because if you crash you have insurance to pay for damages.) Some companies think that unlicensed, foreign & international licensees pose less morale and moral hazards for insurance purposes than their US licensed counterparts, perhaps for fear of getting pulled over by police and arrested or deported if they are undocumented aliens. Notice that the insurance companies are not in business to implement the laws, but are in business to make profit by charging premiums and paying for damages when their clients cause the damages.