Risk e-Business

Car Sharing? Protect Yourself First!

A Valuable Service

Car sharing is an economical way for people who don't own a vehicle - or who need an extra one periodically - to access a private vehicle. Led by Zipcar, the service have been extremely popular in urban areas and at colleges - including Bates College in Lewiston. Now, it's finally come to Portland, Maine - thanks to UCarShare, a division of Uhaul. 

Car sharing is often seen as environmentally friendly, because it can reduce the overall number of vehicles on the road, cut down on the demand for parking, and allow people who prefer to use alternative transportation (public transportation, bicycle, scooter, walking), but still need to use a private vehicle from time to time. It encourages density, and helps to reduce sprawl by making city living more convenient. We support the idea, and have blogged about it before. 

One Big Issue

There's just one aspect that we think you should think about before joining a car share service: liability. Car share companies provide insurance for members while driving the car. But how much? Zipcar says they provide $300,000 of liability coverage (less for members under 21 years old). 

The problem is, you can get into a lot more trouble than that. Maine's Wrongful Death Statute allows up to $500,000 in damages per person, PLUS punitive damages. If you're driving a Zipcar and cause an accident that kills someone, you could be looking at at least $200,000 of responsibility, out of your own pocket. Even worse, you'd have to pay your own legal defense expenses once Zipcar's $300,000 limit was exhausted. 

UCarShare appears to offer even less liability coverage. Their web site says that they offer state minimum limits: $50,000 per person, and $25,000 for property damage (They haven't responded to my email to clarify this). Many cars on the road are worth more than $25,000, and it's easy to imagine a highway accident that would involve several vehicles. Never mind that $50,000 of bodily injury coverage is only 10% of the wrongful death damage limit.  

And, Maine's minimum limits are higher than most. If you cross the border into New Hampshire, you're packing protection of $25,000 per person. And, don't get us started on Florida, with their $10,000 bodily injury limit per person and $10,000 of property damage. 

You Can Protect Yourself

If you have a Maine auto insurance policy with liability coverage, it will cover you after the car share service's policy limits are exhausted, provided that your liability limits are higher than the service's. 

If you don't have a vehicle of your own, you can buy "named non-owner's" insurance to protect you. Talk to an insurance agent - including us - about this. 

One More Thing...

The car share services typically make you responsible for the first $500 of damage to the shared vehicle. Your Maine insurance policy probably won't help you out with that. Also, read your car share contract carefully. You're probably restricted to listed people driving the vehicle, and on certain types of roads and situations. Know the rules before you get behind the wheel!

Good News to Start 2009: Maine Highway Deaths Reduced

Last year was the least deadly on Maine roads since 1959, according to the Maine Bureau of Highway Safety. Several reasons were cited, some of which showed a possible bright side to 2008's historically high gasoline prices. including fewer miles being driven and people slowing down to conserve fuel. Officials also point to increased seat belt use and safer cars on the road as factors in the positive result.

Will Insurance Rates Drop?

If traffic fatalities are down, then insurance rates will follow, right? We think the answer is a definite "maybe." Here are 3 reasons why:

• Insurance companies use multiple years' experience when they set rates. This avoids wild swings due to one year's particularly bad - or good - experience. Accident fatality statistics have been generally favorable over the last few years. And insurance rates are generally lower as a result (chart below is from III.org).  
• Other accident-related costs are increasing. Car insurance can pay for lots of things: medical bills for injured parties, repair costs and body shop storage charges for damaged vehicles, car rental, and repair for other damaged property (utility poles, buildings, etc.). Many of these costs have increased faster than the overall rate of inflation, which insurance companies have to factor into their rates.

 

• Accident rates haven't decreased, only fatalities.  In a recent Bangor Daily News article, a Maine State Police spokesman said "we've had the same number of crashes.". Of course, insurance companies usually have to pay larger claims in the case of fatalities, but it's the frequency of accidents that drives claims experience (and insurance rates) more than severity.  

Fewer people died last year on Maine roads, and that's great news for everyone. If the trend continues, overall auto insurance rates might continue to drop. Even if it doesn't continue, the good experience should have a calming effect on Maine auto insurance rates. 

Dealing with Increased Risk from Holiday Travel

As Americans take to the roads, rails and sky for the holidays, an alarming percentage don’t fully understand whether their insurance coverage adequately protects them, according to a new national surveyon travel insurance issues by Trusted Choice® and the Independent Insurance Agents & Brokers of America (the Big “I”).

For the survey, 1021 respondents were asked if they thought that their insurance policies would cover them against common travel risks, such as renting a car, luggage lost by an airline, theft of gifts from a vehicle, or medical expenses from illness or injuries when traveling. An alarming 30 to 75%, either didn’t think they were covered by their current policies in these situations or said they didn’t know.

We advise they consult with their agent to discuss their current policies and what do to in the event that they need to file a claim while on vacation. The good news for consumers is that homeowner’s insurance policies may cover lost property, car insurance policies often offer the option of rental coverage, and medical policies usually have clauses that explain where and when you are covered.

Trusted Choice^® independent agents provide the following tips for holiday travelers.

Lost Luggage

Although 75% of homeowners did not think or did not know if they would be covered in the event that an airline lost their luggage containing holiday gifts, most homeowners or renters insurance policies do provide worldwide coverage for most belongings. Additionally, some airlines do have reimbursement policies in the event that they lose your luggage. If you purchased the lost gifts with a credit card, you may have some level of protection with your issuers. Photographing the contents of your suitcase may also help in the event of a loss. Before purchasing baggage insurance, check your current policies. It may be a waste of money.

Renting a Car

The survey found that nearly one third of consumers do not think or do not know if their current policies cover them in a rental vehicle. Maine auto insurance policies provide protection for liability you incur for injuries or property damage you cause to others within the U.S. Driving a rental car is considered to be the same as driving your own vehicle for liability purposes. 

Liability Damage Waiver - It’s not usually necessary to purchase a Liability Damage Waiver from the rental car agency since you usually already have coverage under your own insurance. Always request a copy of the rental agreement to review ahead of time with your independent insurance agent. 

Collision Damage Waiver - Rental car agencies typically try to sell “Collision Damage Waivers” (CDW) for about $8 - $15 per day. These waivers are not insurance. In effect, a CDW is simply a promise made to the rental car agency that they won’t make you repair or replace a damaged or stolen vehicle. If you already carry collision and comprehensive coverage under your own personal auto policy, your insurance will extend to the rental car. Consumers need to carefully evaluate their existing coverage and discuss whether or not purchasing a CDW is appropriate for them. 

There may be gaps in the coverage your insurance policy provides for rental cars.  For example, many car rental companies may hold you responsible for the loss of use of a damaged rental car. Rental car companies may charge you the daily rental rate for every day the car is undergoing repairs. While many auto insurance policies will pay “loss of use” charges, those that do set limits. There are other expenses that most auto policies do not cover. One example is diminished value which can amount to several thousand dollars. Consult your independent insurance agent to find out what’s best for your travel needs.

When CDWs May be Appropriate -  There may be gaps in the coverage your insurance policy provides for rental cars.  For example, many car rental companies may hold you responsible for the loss of use of a damaged rental car. Rental car companies may charge you the daily rental rate for every day the car is undergoing repairs. While many auto insurance policies will pay “loss of use” charges, those that do set limits. There are other expenses that most auto policies do not cover. One example is diminished value which can amount to several thousand dollars. Consult your independent insurance agent to find out what’s best for your travel needs.

• Foreign Travel - As a general rule, when traveling to a country other than Canada and renting a car, you will have to purchase auto insurance in the country where you will be driving. Some personal umbrella policies may provide liability coverage for rental cars abroad; few will cover damage to the rental car itself.  Again, seek professional expert advice from an independent agent before you leave home. 

• Check the Vehicle -  An important way to protect yourself when renting a vehicle is to check over the car carefully for damage in the presence of a representative of the rental car company before you leave the lot and when you return it. Request all prior damages be noted in writing. Car renters have been known to receive damage claims from rental car companies weeks after turning in vehicles. There is no way to prove your innocence at that point. 

What if You Need Medical Attention Out-of-State or in a Foreign Country?

The survey found that more than 35% of respondents did not think or did not know if they were covered in the event that they became ill or injured no matter where they were located. Most individual and employer-provided health and medical insurance policies cover you when you are injured or become sick no matter where your injury or illness occurs for short recreational trips. In general, major medical health insurance plans sold in the U.S. will provide coverage for emergency medical services you require while traveling. Still, insurance companies cannot guarantee the quality of care that is available wherever you travel and some policies have territorial restrictions.

• Domestic Travel:  While the medical services provided in the U.S. may be among the finest in the world, not all facilities and practices may offer the standard of care or access to the latest medical technologies that you may expect.  Therefore, travelers should take some time to find out what is available in the area where they will be traveling and contact their independent insurance agent to assess just how well their insurance coverage will respond to medical emergencies away from home.

• Foreign Travel:  When evaluating insurance policies for a brief trip or extended stay abroad, it is important to understand any limitations in coverage that each prospective policy might impose.  For example, it is not unusual for "Foreign" (called foreign even though it’s purchased here at home) health insurance to exclude coverage for injuries that occur while participating in hazardous activities. Ask questions and understand exactly what you are buying and what is covered.

Medicare Consideration: Those who rely on the Social Security Medicare program should know that it does not cover hospital and medical services outside of the U.S. Before you leave the country, learn what medical services your health insurance will provide while you are abroad and consider the purchase of additional insurance protection.

Pay as You Drive (PAYD) Car Insurance

Many Mainers, especially retirees and those who bike, walk,  bus or live close to work, drive less than the average American. That's one reason Maine's auto insurance premiums are among the lowest in the country, despite our harsh winters. Still, many of our clients ask about discounts for driving fewer miles.

The idea appeals to our common sense, doesn't it? Even the Freakonomics guys agreed. Here's some of what they wrote in their April 20 column in the New York Times Magazine:

Imagine that Arthur and Zelda live in the same city and occupy the same insurance risk pool but that Arthur drives 30,000 miles a year while Zelda drives just 3,000. Under the current system, Zelda probably pays the same amount for insurance as Arthur.
While some insurance companies do offer a small discount for driving less — usually based on self-reporting, which has an obvious shortcoming — U.S. auto insurance is generally an all-you-can-eat affair. Which means that the 27,000 more miles than Zelda that Arthur drives don’t cost him a penny, even as each mile produces externalities for everyone. It also means that low-mileage drivers like Zelda subsidize high-mileage drivers like Arthur.

Every auto insurer in Maine uses the system described above. They ask how you use your vehicle, and give a small discount to those who tell them that they use theirs for "pleasure use" or a "short commute". 

But one insurer, Progressive, has introduced a "pay as you go" system they've dubbed "MyRate".  It promises discounts for driving fewer miles, not driving late at night, and driving defensively. Sounds good, huh? As with many seemingly simple ideas that appeal to our "common sense", the devil is in the details. 

Consider:

1. The program requires credible monitoring that yields reliable results. Progressive has developed a chip that you plug into your car's OBD (on-board diagnostic) port. The device monitors your speed, the time of day you're driving, and how many miles you drive. It's not a GPS - it doesn't report WHERE you are - but the amount of data it does collect and send to Progressive has given pause to some who are concerned with privacy in the digital age. 
2. Your insurance rates can also INCREASE if your driving habits change (new job? take up hiking or camping? new long-distance love interest?), or reflect a higher risk profile (kid starts driving?). While you can quit the program, if you stay with Progressive, they may use the data about you that they've collected when rating your future policies. 
3. The device costs about $30.00 to buy, and the premium quote you used to evaluate whether to buy the policy was only an up-front estimate. So, even if you thought that your discount would more than pay for the up-front cost, that can change (see #2 above). 
4. MyRate is currently not available in Maine. In fact, it's only available in 8 states, New Jersey being the closest. And, what we consider the biggest drawback of all... 
5. You can't buy a MyRate policy from an agent; the only channel where it's available is from Progressive Direct. This means that you're on your own in dealing with the insurance company if you choose to buy a policy this way. 

Maybe MyRate makes sense for you after reviewing the facts of the program. We do like some of the features. It rewards safer driving and less-risky behavior. It also rewards those who choose to drive less, which is good for the environment and for our communities too.  

What we don't like is that Progressive chooses to only sell the product directly to consumers. Of course, part of that is self-interest: we're insurance agents after all. If we don't believe we add value to the insurance transaction, then we should just wither away to extinction. But most Progressive customers agree, and prefer to buy from an independent agent. The vast majority of their business is produced through local agencies like ours.

Insurance is complicated enough; this new method offers its own twists, not to mention the privacy concerns mentioned above.  We wonder how many people will feel comfortable facing this new insurance model without a local professional to help, advise and advocate for them. Why not allow customers to use an agent to help them vet this model to see if it really makes sense for their situation?

Joining the Scooter Parade? Check this Out

This summer, I've noticed a LOT more motorcycles, scooters and bicycles on the road. Many Greater Portlanders seem to have responded to higher gas prices by dropping from 4 wheels to two. I'm one of those human-powered commuters, at least when my schedule allows.  

One of the appealing features of scooters for many is that they don't require a special license, unlike a motorcycle. Unfortunately, because there's no license test to study for, there's also a shortage of good safety and information for scooter riders.

We recently came across this excellent booklet  from the Motorcycle Safety Foundation. Whether you're a rider, or just thinking about becoming one, it's worth a read.

Bicycle Commuting: Reducing Financial Risks

Bicycle commuting is increasingly popular, with over 200 people registered for the online Portland Bicycle Commuting Meetup group. You don't need a fancy new bike to commute. In fact, many people use older 10 speed or 3-speed bikes. But many others have invested a considerable amount in their commuter bikes. 

Of course there are many ways to protect their asset and means of transportation. A good lock is a no-brainer. So is riding carefully and competently to avoid colliding with vehicles. Ditto for dressing brightly and using lights to increase visibility. 

But what if the worst happens? What if your bike is stolen, or if you are in an accident with your bike? The good news is that homeowners or renters insurance will cover damage to your bike caused by theft or collision with a vehicle. The bad news is that too many apartment-dwellers (a considerable share of the bike-commuting population) fail to buy renters insurance at all. This stuff is cheap! Covering your "stuff" up to $20,000 often costs less than $15.00 a month. If you own a vehicle, you can usually save on car insurance if you buy a renters' or homeowners policy from the same company. Often, the car insurance savings will almost pay for a renters policy. 

Losing your bike would stink, but losing everything else, including future earnings, would stink even more. That's what can happen if you cause an accident. See, you can be liable for an accident just like an auto driver can. Let's say you make an "Idaho stop", and proceed through the intersection, failing to notice that oncoming car. The car slams on the brakes, swerves, and misses you, but hits something else. Guess who's at fault? It would be nice to have some insurance to help you pay the damages and court costs. That's what your old friend the homeowners/renters policy is for! 

Most cyclists take care to operate their bikes safely and protect their property. They invest a lot of time and effort into staying safe. Despite these efforts, bad things can happen. So do yourself a favor: buy a renters or homeowners policy and protect yourself. 

Bike Commuting - A "newbie" Hits the Streets (not literally)

I recently bought my first new bike since I was in junior high (I know, that term gives away my age), and have been trying to commute to work one day a week. It's good exercise, lots of fun, saves gas, and takes one more car off the road - at least briefly. 

I had a few questions to answer before attempting my first commute.

• Did I have the stamina? My job is mostly sedentary. I walk more than most people, but that's the extent of my regular exercise. To build endurance, I took longer and longer rides, culminating with a Sunday night "dry run" to the office. It's only 6 miles, but there are some pretty big hills. It was surprisingly easy. Within a week or two, I felt ready.   
• How would I manage traffic? Sharing the road with cars and trucks was a bit intimidating at first. I went to a discussion about bike safety sponsored by the Portland Bike Commuters Meetup Group. It was great! I learned how to ride in traffic and to increase my safety while on the bike. 

The main idea is to dress "bright and tight" and behave like a slow vehicle on the roads - which makes perfect sense. In other words, stay on the street (sidewalks are for pedestrians), "take the lane" when necessary and appropriate, and behave in a predictable manner - using the rules of the road that I already know from driving a car. I also bought a blinky red light for the rear of my bike - only $2.00! A bargain! 

 I joined the online Meetup Group that night, and was pleasantly surprised to learn that there were over 200 members who were commuting in Greater Portland!

• How would I "clean up" at work? Our office doesn't have a shower. I found that the cool temperatures in the morning prevented me from getting too sweaty. I also paced myself to avoid getting overheated, and dressed in layers I could peel off if necessary (it wasn't). I found some great beginner's tips at a web site called Commuting 101 where people shared practical ideas about bike commuting. 
• What if I had an unexpected appointment during the day? This one hasn't come up yet. I have been able to arrange my schedule for one "office day" a week. If I really needed to get someplace in a hurry, I could probably borrow a co-worker's car. 

I don't think I'll become a hard-core year-round bike commuter like some of the people I see on the road every day, but I've enjoyed my "alternate commute" the few times I've done it. 

Some early observations:

• It doesn't take much longer than commuting by car. About 30 minutes vs. 15 by car.   

Portland drivers are quite accommodating to bikes.  People generally give me the 3 feet clearance they're supposed to, and pass me only when it's safe to do so. They're also patient when I join them in a line of traffic at a light, allowing me to clear the intersection without tailing too closely.

The proper equipment helps me to feel more confident. Thanks to a timely birthday, I now have a white front light, a "screaming yellow" jacket, the aforementioned blinky red light, a pump and water bottle. I feel visible and equipped to handle most minor emergencies that could arise. I carry a cell phone just in case. 

In the next post, we'll talk about how cyclists can protect themselves and their bikes from other types of accidents. 

Car Sharing and Insurance

Our last post talked about a new condo development proposed for downtown Portland, ME that featured shared cars for unit owners. Coincidentally, Joseph White's column in today's Wall St. Journal discusses the growing appeal of car-sharing services like Zipcar. Essentially, it works like this: you pay a membership fee to join a service, which gives you access to several vehicles parked in various locations around larger cities. You reserve a car, pick it up at the designated spot, and pay only for the time, tolls and parking when you use it.

I've seen Zipcars in several major cities, and even a few in Maine (probably Boston folks escaping the city for the weekend), and some of them put my ride to shame. They have everything from Mini Coopers to minivans, SUVs to BMWs. The concept makes sense for non-car-owning city dwellers who need access to a good vehicle periodically.

Sharing ownership of anything doesn't always come naturally to many Americans. We tend to be picky about our "stuff" - especially our cars. What if the last driver left the car a mess? Or low on fuel? Or in the wrong lot? Who maintains the vehicles? Of course, the car-sharing services address these and other issues.

What about insurance? In our agency, we haven't actually seen a car-sharing contract, or been asked by our clients yet. However, our understanding is that at least one car-sharing company buys a blanket auto policy providing $300,000 liability coverage (much lower limits for those under 21), and assesses a $500 fee for damage you cause in an at-fault accident. Presumably, a condo association would buy similar coverage. Most insurers would be reluctant to insure lots of different unrelated drivers; they would probably charge more as a result. And, what if one of the condo unit owners was a poor driver? Would the other drivers have to pay more money for their exposure?

Another issue: many individuals have assets higher than $300,000. And Maine's Wrongful Death Statute allows up to $500,000 in damages per person, PLUS punitive damages. Many members, if they don't own other vehicles, may have no auto coverage of their own. They would be out of luck if an accident exhausted the $300,000 limit, and would be responsible for the remainder of the damages "out of pocket".

Possible solutions: One could buy a "named non-owner" policy, or a personal umbrella policy. How the latter would respond to a "shared car" situation is an interesting question that has (to our knowledge) not been presented.

Sometimes, societal changes happen faster than the insurance industry can react, but the industry's mission is to help the public manage risk. Car sharing services are gaining in popularity. It's a matter of time before personal auto insurers develop procedures for addressing the exposures they present. We suggest that you confer with your agent if you are thinking about joining a service.

New urbanism: “micro-housing”, shared vehicles and other trends

A Portland developer hopes to cash in on the current appeal of chic city housing, with an innovative proposal for the corner of High and Danforth Streets. The building would contain 26 “micro units” - each 450 to 800 square feet - with shared lounges, laundry, and even guest rooms. One of the most intriguing features of the project is the concept of the condo owners sharing use of commonly-owned vehicles.

Publications as diverse as the Wall Street Journal and The Atlantic Monthly have noted the trend to “downsize” housing from the suburban McMansions that were built in the past 15 years to smaller spaces closer to town. The movement has been dubbed “micro-housing” by some, the “not so big house” by others.

Nudged by recent increases in home heating and gasoline costs, along with smaller household sizes as the Baby Boomer population pig pushes through the demographic python, many Americans are looking to downsize, and lots are looking to move closer to cities’ amenities, health care facilities and social life.

Which brings us back to the northeast corner of High and Danforth Streets in Portland, Maine.

Looking at this lot, it’s hard to imagine how one could squeeze 26 condo units (and the residents’ cars) onto it. The short answer is, it’s impossible, without thinking differently. Picture a building owned by an association of 20-somethings who may be buying their first real estate, and work within walking distance; older singles (50-60) attracted to downtown amenities; and out-of-towners seeking a Portland pied-à-terre. Imagine only 14 parking spaces under the building for those 26 units, two of which are for shared vehicles.

Green types applaud the project’s low-impact, pedestrian-centric design. Affordable housing fans like the promise of home ownership for those who might otherwise be shut out. New urbanists like the community orientation and the opportunity for people to walk to work, and “third places”. For developers, it allows maximum profit from a minimum parcel. And, because of the small sizes of the units, municipalities have considered variances to normal parking requirements.

For some people, this is a great idea. But it does pose some practical issues, not the least of which is how to insure them. More about that in our next post.

Alternative Transportation: Golf Carts

Higher fuel prices continue to inspire Americans to find another way to get from here to there. An Associated Press report in last week's Press Herald talks about the growing use of golf carts as alternative transportation. Increased golf cart use has led to a corresponding increase in emergency room visits -12,000 a year - as energy-sipping buggies brave public roads with their larger, faster cousins.

Several Maine jurisdictions, including Chebeague Island, have passed ordinances allowing use of golf carts on some public roads, subject to restrictions. Some of our clients who live in these communities have been required to provide evidence of liability insurance in order to use their golf carts on local roads.

If it’s licensed for use on public roads, Maine Law requires the owner of any vehicle subject to registration for use on public roads to purchase liability insurance. Just one problem: homeowners policies only cover golf carts being used on your land, or when you’re actually playing golf (on a golf course!); and you can’t add a golf cart to a standard auto policy. What’s a frugal consumer to do?

Some insurers have introduced special policies, similar to motorcycle policies, for golf carts. They provide the liability and uninsured motorist coverage that are required by Maine Law. There have been some reports of agents issuing insurance ID cards for carts without the proper coverage. Make sure that you have a policy specifically listing your golf cart, and specifying that it covers use on public roads. Otherwise, if you become one of the 12,000, you might find your trip to the ER is even more expensive than you thought.