Throughout much of the 1990s, the road to auto insurance accountability and compliance in the state of New York was in disarray. That's because throughout the decade, New York state officials and auto insurers watched with helpless dismay as a growing number of New York motorists circumvented a mandatory auto insurance law. They did this by carrying fraudulent insurance identification cards.In many instances, using a fake ID will only take the illegal user so far. But in New York, the inability of state databases to crack down on the activity enabled card carriers to run amok. With detection difficult, motorists saw an opportunity to create their own proof-of-insurance cards.
State officials and auto carriers that conducted business in New York knew if the problem continued unabated, auto insurance costs in New York could spiral out of control. In essence, honest auto insurance buyers would subsidize dishonest ones.
Insurers and state motor vehicle officials identified a way to solve the problem through a software application designed by Dallas-based Docucorp International.
In conjunction with Holtsville, N.Y.-based Symbol Technologies, Docucorp developed a two-dimensional stacked bar code that could be embedded into an insurance client's ID card. Capable of encoding over a kilobyte of data per label, the card can be used in situations where a database isn't accessible for reading the bar code, such as on a roadside by a police officer. Because the bar code can store so much information, it can contain data such as proof of insurance and history.
"As insurers move more information electronically and create additional points of access, they will continue to require integrated solutions that have the management and authentication capabilities necessary to protect themselves, and ultimately consumers, from the high cost of fraud," says Robert Steinke, vice president of technology for Docucorp.
Driving accountability
Several years ago, the American Association of Motor Vehicle Administrators (AAMVA) weighed in on what had become a festering problem-auto insurance ID fraud.
A sponsor of model programs in motor vehicle administration, police traffic services and highway safety, the AAMVA recommended standards for encoding driver information into ID bar codes to help insurers and state agencies combat fraud.
They also recommended deploying digital signatures to ensure the validity of the data. With this method, digital keys are encrypted inside a buffer to protect information as well as to frustrate counterfeiters who might make fraudulent ID cards.
Developed around high-density bar codes for interjurisdictional communication of information, AAMVA's solution would provide greater capability to encode data than one-dimensional, "low-density" bar codes could.
The result: a common way of describing data to make it easier for law enforcement agencies to develop systems capable of tracking driver and vehicle information.
Joint effort
Recognizing their dilemma, the state of New York passed a law in 1997 authorizing an insured vehicle database to accurately identify uninsured vehicles. Referred to as the Insurance Information and Enforcement System (IIES), the database was developed by the New York Department of Motor Vehicles, the New York State Insurance Department and other agencies.
The most important component of IIES was a cryptographic bar-coded insurance ID card that virtually eliminated the potential for drivers to use counterfeit cards, thus forcing them to maintain proper insurance.
But the law's passage did not automatically make ID card fraud disappear. As the first state to adopt the AAMVA's proposed standards, New York originally set July 1, 2001 as the deadline when non-bar coded ID cards would no longer be accepted. Due to technical issues and the terrorist attacks of September 11, the date was moved to January 1, 2002.
On that date, auto insurance carriers that conducted business in the state were expected to have a system in place to mass-produce ID cards and distribute them to policyholders. To help in the effort, the state of New York created a Windows-based PC application to print the cards. However, the application could only be used for small print jobs on desktop machines.
Many auto insurers in New York who had used Docucorp software for policy production turned to Docucorp, because it was in the process of developing a high-volume, high-speed method of printing ID cards.
Working in conjunction with Symbol Technologies, Docucorp launched a technology referred to as PDF 417 (or Portable Data File 417) for use with its bar code scanners.
Typically, Windows and PC-based programs print high-density bar codes such as PDF 417 as bitmap graphics, which are acceptable for use on small printers in low volumes, explains Steinke.
But that method creates performance bottlenecks on high-volume laser printers, such as those typically used by large insurance companies.
Docucorp addressed this requirement by creating software that translated the bar-coded information into character values that could be used with a special PDF 417 font, eliminating the need for slower bitmap graphics.
After receiving the source code for New York's PC-based application, Docucorp integrated the code with its own enterprise policy production and publishing applications, and in January 2001 released the new product, which has since enabled approximately 20 carriers doing business in New York to receive certification for their insurance ID cards. Unfortunately, insurers contacted for this article declined to discuss the program since it was so new.
Docucorp's PDF 417 software is currently specific to New York. But because the AAMVA standards provide for variation by state or municipality, other states adopting insurance ID-card legislation will likely have their own variable data and "look-and-feel" requirements, notes Steinke. However, much of the Docucorp solution will transfer and should enable insurers doing business in other states to issue similar bar-coded insurance ID cards.
A growing problem
The auto insurance fraud application is expected to serve state officials, insurers and policyholders well. According to the Coalition Against Insurance Fraud (CAIF), insurance fraud is a growing problem across the country, especially in areas such as New York and Southern California, where up to 50% of all auto insurance claims are fraudulent.
The CAIF estimates insurance fraud totals $80 billion annually. The Insurance Research Coun-cil estimates that 14% of motorists nationwide drive without insurance. In some states, it's as high as 30%.
"State agencies and insurance companies continually investigate ways to reduce fraud, a problem which costs the average American family $950 a year," says Steinke. "Docucorp's software solution for auto insurers in New York is just a first step in providing advanced tools in this battle."
