The system of motor vehicle insurance in the United States is based on the ever-changing risk and loss experience of insurers, which in turn is created by the way in which individual drivers operate their cars and trucks on an everyday basis. Given a choice, any insurer would prefer to insure a group of drivers whose driving habits made them accident-free rather than people whose operation of their vehicles was constantly resulting in costly accidents for which the insurer was financially responsible. One way in which insurers attempt to move away from a risk pool made up of the latter group of insureds and toward a pool made up of the former group is by canceling coverage for people who have a history of getting into accidents or whose driving records reflect a pattern of traffic violations.
The insured parties who are threatened with or made subject to cancellation of their policies necessarily view the matter very differently, arguing that the reason why the insurer accepted their premiums under a policy was to insure them against the very types of risks that the insurer wants to make the basis for canceling the policy. This fundamental disagreement is complicated further by the existence of legal requirements that a vehicle operator maintain a policy of insurance in order to be permitted to drive a car or truck on the public highways.
Regulation of the business of insurance and the legal requirements covering motor vehicle insurance are a matter of state rather than federal law and can differ markedly from state to state. Because of the generally mandatory nature of insurance coverage and the serious problems created by the operation of cars and trucks by uninsured persons, many states impose various limitations on the freedom of insurers to cancel motor vehicle insurance policies, from notification requirements to actual restrictions on the causes for which cancellation will be permitted.
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