Thread: CA: Illegal immigrants find legal insurance with local firm

Illegal immigrants find legal insurance with local firm
By Jim McLain (Contact)
Sunday, June 17, 2007

When the Wall Street Journal quoted him in a front-page story on companies that sell automobile insurance to illegal immigrants, Brian Duffy got a call early the same day from a producer who works with conservative TV commentator Bill O'Reilly.

It was an invitation to appear that night on Fox News's "The O'Reilly Factor." The producer wanted him to debate the merits of his business one-on-one with the show's outspoken, often bombastic host. He said no in a heartbeat.

"I said thanks, but no thanks," said Duffy, 65, of Ventura. "I didn't respond. He would have eaten me alive. It is what it is. I don't presume to have the answer to this."

Duffy is president and CEO of Alliance United, a Ventura-based auto insurer that provides coverage to what the industry calls "nonstandard drivers." That mostly means people with too many tickets or accidents. But it also extends to unlicensed drivers, and that group is increasingly made up of illegal immigrants.

It isn't a major chunk of his business probably a little over 5 percent but selling coverage to drivers who cannot get a license because they are in the country illegally is increasingly important and lucrative to Alliance United, as well as about 40 other California auto insurers.

The practice is legal.

And though some politicians and immigration policy critics complain companies like Alliance United are profiting by catering to people they contend are a burden on schools, hospitals and other tax-funded resources, Duffy has a message for them: "I am not the license police."

"Now, would you prefer to be hit by somebody with insurance, but without a license," he said, "or somebody who doesn't have a license and also doesn't have insurance and you don't know who he or she is?"

Legal, lucrative opportunity

Duffy and three partners launched Alliance United in 1996 as a wholesaler of other companies' insurance. When they determined a few years ago that selling auto insurance to undocumented immigrants was a legal and potentially lucrative opportunity, they bought a small Iowa insurer, moved it to California and began pursuing a piece of the state's $2.5 billion market of nonstandard drivers early in 2004.

Today, they have about 70,000 policies covering some 50,000 drivers, perhaps 2,500 of them illegal immigrants.

That's miniscule in California. where there are 23.2 million licensed drivers with more than 33 million registered vehicles, according to the Department of Motor Vehicles. But Duffy and his partners, David Mandel, the chairman, and Kjell Austad, vice president of sales and marketing, say Alliance United is growing fast.

The company has 105 employees at offices in Ventura and Chatsworth, with premiums expected to total $40 million to $50 million by the end of the year. About 375 independent agents with 600 offices sell an average of 300 Alliance United policies every day, Duffy said.

They mostly focus on the Hispanic market with the average customer paying less than $1,000 annually for the minimum coverage the law allows.

Many clients don't qualify as good drivers under California law and pay 20 percent above normal rates. Barred from obtaining driver's licenses, illegal immigrants are in that group automatically.

Though driving without a valid license is illegal, it is often not punished if the driver is insured and his registration is current. Nothing in the law says illegal immigrants cannot buy insurance.

Some people think such coverage protects immigrants by not having to involve police when a minor accident occurs and benefits other drivers who can collect after a mishap.

"The car is the thing that is being insured," said Armando Botello, a DMV spokesman. "So it is not against the law for someone who doesn't have a driver's license to own a car and have it insured. There are many cases of people not even falling into the undocumented category who have cars but don't have driver's licenses, disabled people, some of the elderly, etc."

The Department of Insurance does not estimate the number of illegal immigrants who have automobile insurance. Neither do the companies that sell it. California began barring illegal immigrants from obtaining driver's licenses in the mid-1990s by requiring a Social Security number as proof of legal residency, the DMV's Botello said.

A few years ago, the rule was expanded to include renewals for those who had obtained a license before the Social Security rule was implemented.

Citing potential security problems, Gov. Arnold Schwarzenegger has vetoed two bills allowing illegal immigrants to obtain driver's licenses even though backers argued most drive to work every day anyway.

A third bill passed the Senate on June 4, but it hasn't been scheduled for a vote in the Assembly. Schwarzenegger has not said whether he will sign it if it passes. Most large insurance companies won't sell automobile coverage to illegal immigrants because they don't cover unlicensed drivers.

Free to sell'

"There is no law in California that prohibits an insurance company from selling insurance to an illegal immigrant," said Jennifer Kerns, a spokeswoman for the California Department of Insurance. "Insurance companies are free to sell to a variety of clients, including illegal immigrants."

Alliance United's agents earn 10 percent to 15 percent a year on each policy they sell. Doing business with illegal immigrants can be very lucrative, independent insurance agent Jose Cataño of La Puente said, because they rarely report minor accidents to avoid contact with authorities.

According to the Wall Street Journal, Cataño advertises heavily on Spanish-language radio using the slogan: "Arnold won't give you a license, but Cataño will give you insurance."

Duffy described Cataño as one of Alliance United's busiest agents.

Troy Sathers, long-time owner of Sathers' Insurance Service in Ventura, said his younger customers like Alliance United because it provides minimum coverage at modest rates. They rarely complain about the company, which accounts for 8 percent to 10 percent of his agency's business.

Sales to illegal immigrants are probably only 3 percent of his business today, but Sathers said he expects that category to top 10 percent in about two years.

Alliance United is hardly alone in aggressively marketing its services to undocumented immigrants. Numerous banks tapped into the purchasing power of the country's estimated 12 million illegal immigrants a few years ago when federal laws were changed to allow people with foreign identification cards to open bank accounts.

Earlier this year, Bank of America Corp. began offering a credit card to people without a Social Security number or credit history, a group that includes mostly illegal immigrants.

Alliance United's competitors for illegal immigrants' business include major insurance companies like Progressive Corp. and Bristol West Holdings Inc., which agreed in April to be acquired by Farmers Group Inc. Bristol accepts a Mexican matricula consular card as a driver's license substitute.

Fraud target

Because Alliance United specializes in selling the minimum allowable coverage, its customers include many people with low incomes and flawed driving records, Duffy said. Many are transient, periodically starting then stopping coverage, then starting again. Most of them pay by the month because they cannot cover the upfront costs of six months or a year of premiums.

All auto insurance companies are targets for fraudulent claims, Duffy said, but companies like his tend to be hit more often because their customers are poor and see insurance companies as easy marks.

Alliance United has had cases where someone involved in an accident buys coverage, then claims the collision occurred after the policy was purchased. People try to collect for accidents that never happened, he said, or say eight people in a car were hurt when police reported only six at the scene. One person reported a fatality in a crash in which no one was hurt.

California Insurance Commissioner Steve Poizner said recently that fraud adds about $500 annually to every California driver's auto insurance premium.

Often, Duffy said, it is committed by organized crime rings in patterns of multiple phony collisions and fender-bender mishaps. His company investigates every accident report for possible fraud.

"Because we're selling coverage contracts and because we're trying to keep low prices, we're pretty vigilant about that," Duffy said. "We will report those to the District Attorney ... We want to stop that because it raises great consternation for you, me, and everybody. I don't want to be defrauded."

Still, Duffy is keenly aware that providing insurance to undocumented immigrants is the most controversial part of Alliance United's business. He understands some people don't like the practice, but he will not apologize for it.

"I don't have the answer to the problem. I run a business and I'm trying to earn a retirement for shareholders, including myself," Duffy said. "I'm not trying to exploit anybody."

http://www.venturacountystar.com/news/2 ... t-license/

Immigration Grips Ga. Race for Congress

ATLANTA (AP) -- In what could be a harbinger of next year's congressional campaigns, Iraq and immigration have dominated the special election to replace deceased Republican Representative Charlie Norwood in northeast Georgia.

Ten candidates -- six Republicans, three Democrats and a Libertarian -- have lined up to represent the tenth congressional district, which includes Athens, home to the University of Georgia, as well as Fort Gordon and parts of Augusta.

The election on Tuesday is the first congressional contest since the Democrats won control of Congress last year and it will be watched closely for any clues it might provide to the high-stakes 2008 elections. A strong Democratic showing in the GOP-leaning district could spell more trouble for Republicans next year as the war in Iraq continues to loom.

It's quite possible a winner won't be chosen right away. Unless one of the candidates breaks away from the pack and pulls more than 50 percent of the vote in Tuesday's election, the race will be decided by a runoff on July 17.

The race's odds-on favorite is former state Senator Jim Whitehead, a small businessman from Evans, just outside Augusta, who has lined up the support of much of the Republican establishment.

The blunt-spoken Norwood -- who died in February after battling cancer and lung disease -- is still beloved in the district he represented since 1994. Whitehead has won the critical endorsement of his widow, Gloria.

(Copyright 2007 by The Associated Press. All Rights Reserved.)

http://www.11alive.com/news/article_new ... ryid=98698