The Insurance Industry Access to Driver Data (IIADD) database, branded as MyLicence, could mean easier and more accurate car insurance quotes.
The title MyLicence is the brand name for the Insurance Industry Access to Driver Data (IIADD) database, which gives participating insurers access to drivers' information held by the DVLA when they supply their driving licence number (DLN).
The information supplied includes the type of licence a motorist holds, how long they've held it and whether they have any driving convictions.
Amongst other benefits, this helps drivers answer questions easily and accurately in the insurance application process and serves as a deterrence against fraud.
If you're forced to claim on your motor insurance, MyLicence should also make that process easier.
Insurers will be aware of all your details straight away and be less likely to question any information given to them.
At the moment the MyLicence scheme is voluntary for both insurers and drivers.
If an individual doesn't want their information to be accessed by insurers they can refuse to consent to the fair processing notice if and when asked that question.
They should then be asked to self-declare their information.
It's for each individual insurer to decide whether they insist that a DLN is provided before they proceed to offer customers a quote, so if you refuse to consent to the fair processing notice your choice of insurance provider may be more limited.
If motorists supply their DLN, an automatic check can be processed from the database which will return accurate information on licences.
Information will only be available from Great Britain (GB) licence holders (mainland England, Scotland or Wales, excluding Northern Ireland, the Isle of Man and Channel Islands). Non-GB licence holders will continue to self-declare their information.
This is the first time external parties have had access to a government database.
IIADD is a combined initiative between the DVLA, the Department for Transport, and the insurance industry which is represented by the Association of British Insurers (ABI) and the Motor Insurers' Bureau (MIB).
We believe that this will lead to more accurate risk pricing so that the premium you pay as far as possible reflects the risk you run
Malcolm Tarling, Association of British Insurers
Information available on the database includes:
The project has been branded as 'MyLicence' to help promote awareness and understanding of the concept.
Malcolm Tarling, from the ABI, said in an interview with the BBC that the insurance industry wanted to "speed up and simplify the motor insurance application process".
"We believe that this will lead to more accurate risk pricing so that the premium you pay as far as possible reflects the risk you run," said Tarling.
"[It should] also help to keep premiums down by identifying people who deliberately fail to disclose convictions."
It has been estimated by the ABI † that IIADD will save an average customer £15 on the cost of their car insurance.
The project is part of the government's digital agenda, with the paper counterpart to the driving licence card due to be phased out by 2015.
The paper tax disc was scrapped in 2014, with an assisted service introduced for those who find it difficult to use the internet.
Nick Starling, director of general insurance at the ABI said: "[MyLicence] is a significant step forward in the fight against insurance fraud.
"We know that up to a quarter of motorists with driving offences, including disqualification, either do not declare them, or declare something less significant. This is unfair to safer, honest motorists, and increases their premiums.
"Being able to access the DVLA database will not only root out fraud, but also make the process of applying for insurance faster, produce more accurate premiums, and reduce disputes in the event of claims."
While MyLicence has been officially launched, not all insurers are ready to take immediate advantage of the system.
Morgan Selbos, policy adviser at the ABI, said that while there's no 'big-bang approach' to MyLicence, as of June 2014 60% of the motor insurance market had registered.
Instead of customers inputting all their details themselves, including information like when they passed their driving tests and details of convictions, MyLicence will do all that for you by simply asking for your driving licence number
Lee Griffin, Gocompare.com
"It's down to each individual insurer to decide when they roll out the service, but it's a priority for them," said Selbos.
As noted, although MyLicence launched in December 2014 it will take some time for all insurers and comparison sites to be ready to make full use of it.
Gocompare.com has introduced an entirely voluntary question in its car insurance quote process, asking users to supply their driving licence number.
This may then be provided to the DVLA to validate your licence status, entitlement and restriction information and endorsement/conviction data.
"While the new system will help insurers tackle fraud, customers probably won't see the full benefits for a number of years," said Gocompare.com's Lee Griffin.
"In the long term, what it will do is make the quote process when comparing or buying motor insurance much quicker and simpler.
"Instead of customers inputting all their details themselves, including information like when they passed their driving tests and details of convictions, MyLicence will do all that for you by simply asking for your driving licence number.
"I for one can't remember when I passed my driving test, so it's unsurprising that mistakes occur, but this new system will reduce error and eventually the cost of premiums, too."
The introduction of IIADD makes it more important than ever that drivers ensure accurate information is being held about them by keeping the address listed on their driving licence up to date.
MyLicence could also impact on the car hire industry, and companies may be able to lower the amount they charge to rent vehicles.
Car hire firms should be able to check drivers' details online, reducing the amount they spend on administration.
Although the two databases are currently separate, it's hoped that it'll eventually be possible to marry up the IIADD with the Claims and Underwriting Exchange database (Cue).
Cue is a huge database of 'incidents' that are reported to insurance companies. It was created in 1994 as a measure to prevent fraudulent or multiple insurance claims.