NYC weighs slashing cab insurance 75% to $50,000 to aid drivers
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(Bloomberg) –The New York City Council will introduce legislation this week that would drastically reduce the amount of insurance coverage taxi and ride-share vehicles are required to maintain, looking to contain potential fallout from the insolvency of the city’s largest taxi insurer.
Northern Manhattan City Council Member Carmen De La Rosa wants to lower the minimum personal injury protection coverage for commercial ride-share cars in New York City from $200,000 to $50,000. The change would bring insurance requirements in line with levels mandated for ride-share vehicles in the rest of the state, helping lower premiums in an industry beset by financial problems.
“I represent a community in Northern Manhattan where the livery industry is still one of the economic engines for my community,” said De La Rosa, who will introduce the bill on Thursday.
She’s urging the council to act just weeks after the state’s Department of Financial Services warned that American Transit Insurance Co. has “massively deficient” reserves and “is at significant risk of failure.” The company, which insures at least 60% of the city’s roughly 120,000 taxis, livery cabs and ride-share vehicles, disclosed in its latest filings that its losses outstrip reserves by roughly $700 million.
A spokesperson for American Transit did not respond to a request for comment.
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Insurance industry experts have blamed American Transit’s financial circumstances partly on its practice of charging artificially low premiums that aren’t commensurate with its liabilities. If the company failed, the outcome would be “economically devastating for livery drivers, passengers, health care providers and the New York economy, and would disrupt vital transportation services,” DFS has said.
The agency, which regulates all insurers statewide, is working with American Transit on a plan to shore up its finances, which could include a sale or liquidation.
Exorbitant Premiums
De La Rosa said her legislation, which would require a majority of the Council and the mayor’s approval to be enacted, is designed to help city black car and cab drivers, who’ve struggled since rideshare apps upended the economics of the industry. Many drivers are saddled with debt after buying once-valuable Medallions, the relatively scarce city-issued licenses to operate cabs, before their value crumbled.
If another company were to take over American Transit and charge premiums high enough to cover their liabilities, city taxi drivers could see their premiums, which range from $4,000 to $6,000 a year, increase by as much as 30%. That would be devastating to city drivers, De La Rosa said. Even at current levels, taxi drivers’ premiums are “so exorbitant at this point that many drivers are afraid they’re going to lose their livelihoods,” she added.
Personal injury protection, or PIP, also described as “no-fault insurance,” covers medical costs and lost wages for drivers or their passengers if they’re injured in a car accident, regardless of which party was at fault. New York is one of just 12 states in the country that requires drivers to carry such personal injury protection coverage, and the city has one of the highest coverage level requirements in the country.
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New York City’s $200,000 personal injury protection coverage requirement was implemented in 1998, after a series of high-profile crashes led to devastating pedestrian and passenger injuries.
In the 1990s, the rate of accidents involving for-hire vehicles had been steadily increasing, said Matt Daus, a former chair of the city’s Taxi and Limousine Commission, who is now chair of the Transportation Practice Group at law firm Windels Marx.
“When these laws were passed there were no systems in place to get bad drivers off the road,” Daus said. But riding in taxis has become much less risky since then, he said.
New York City’s high PIP coverage requirements have had a negative unintended consequence, becoming a magnet for would-be fraudsters, city and state regulators have said. In no-fault insurance fraud schemes, groups of people manufacture accidents, or fabricate or exaggerate injuries sustained in crashes to exploit the possibility of a six figure payout.
A 2023 DFS report found 75% of all fraud claims the department received that year were suspected cases of “no-fault” insurance fraud.
De La Rosa said the high coverage requirements had also discouraged other insurers from trying to compete in the market — making American Transit too big to fail, as one of the only companies operating in the industry.
