There is a very active market for taxicab business. Andy Jaz, director of the taxi program at Markel Corp., explains, "There is a very select market of perhaps six or seven companies, but new competition is always coming and going."
Markel, Scottsdale, National Casualty, National Indemnity, Essex, Evanston, Starnet, Canal, and Sparta are markets our experts use.
"Because of the prolonged soft market, we've seen some carriers with a B rating that have reached out and considered classes that they didn't historically write," according to Rebecca l. McNabb, transportation manager at Burns & Wilcox. "I can offer an account coverage with an A rated carrier and explain that this is a financially stable company that will be in it for the long haul, but if the account can find cheaper coverage with a B rated carrier, they'll opt for that."
Robert Alkire, senior vice president at 5Star Specialty Programs, a division of Crump Insurance Services, Inc., agrees. He says, "It seems like capacity has increased over the past year. The market is still very competitive, and pricing is also highly competitive."
"Several new carriers entered the marketplace within the past three years that increased competition and drove the pricing down," says Mark A. Iverson, vice president at AmWINS Transportation Underwriters, Inc. "This negatively affected this class of business, caused loss ratios to turn poor, and made placing those risks difficult."
The primary coverage for taxicabs is automobile liability. The main reason this coverage is necessary is that a taxi cannot operate without valid liability coverage. Municipalities regulate taxicabs. In addition to setting requirements for coverage, municipalities also establish minimum levels of coverage.
According to Ms. McNabb, "Because of the economy, many taxi accounts are looking for the cheapest solution, and they're probably going to buy the lowest limit their contract allows. The relatively low liability limit may be inadequate and, if the driver is an owner-operator with just one vehicle and few assets, the injured person might win a lawsuit but still end up with nothing."
However, Mr. Iverson notes, "More airports and other municipalities are requiring higher limits of liability."
Our experts all agree that higher limits are readily available in the marketplace but that most clients are not interested in them.
While most automobile liability policies are similar, there can be important differences. Mr. Alkire says, "Radius limitation and unreported driver exclusions should be avoided."
Other lines of insurance may be important to a customer. Mr. Jaz says, "We offer a package policy with auto liability and general liability for small fleets, and we can write buffer excess as well."
Mr. Iverson says, "Automobile physical damage may be difficult to place." Mr. Alkire and Mr. Jaz explain that they are not open to taxicab physical damage coverage, but Mr. Iverson and Ms. McNabb have markets that are willing to consider it.
This class of business is underwritten carefully. Mr. Iverson says, "Track record (meaning loss history) is key. A continuous losing track record is usually not a favorable factor. Another key area is a solid safety program that includes not only formal training but also technology such as webcams and GPS devices."
Steven Shepard, transportation underwriter-midwest at Burns & Wilcox, adds, "A key criterion is the number of years the operation has been in business and the years of experience of each individual driver, including making sure that drivers have operated cabs in the particular geographic area, like New York, Chicago, or Los Angeles. Another important factor is the radius of operations. Vehicle maintenance is an issue. Another concern is the mileage on vehicles because taxis are usually driven pretty hard."
Additional concerns, according to Ms. McNabb, are: "Who has control of the vehicles? Is it an owner-operator or one person who owns all the vehicles and hires the drivers? Another issue is whether the cabs are metered or whether they make prearranged trips for a set fee."
Mr. Iverson provides the following underwriting criteria used by his markets:
• All vehicles must be operated as fare-based taxicabs
• Vehicles must receive routine maintenance and be inspected for damage and/or wear and tear
• Any vehicle over 13 years old must have an independent garage perform a mechanical inspection
He identifies red flags as: drivers under age 25; those with less than two years' driving experience in the U.S., and those with major MVR violations in the last five years.
Our experts all agree that there is no capacity problem for this line of business. There are many markets available, and new carriers offer pricing below what might be expected for this class of business. Pricing varies. Some of our experts indicate slight increases, others consider pricing to be stable, and still others see the market continuing to be very competitive.
There are some geographic concerns. Some auto carriers are pulling out of states, such as no-fault states, because of lack of profitability. In addition, taxicabs in more congested cities such as New York City and Chicago may be more difficult to place.
Our experts all agree that this is not an easy class and that detailed information is needed to effectively underwrite and price each risk. Mr. Shepard explains it well: ""We're only as good as the information that we get from our retailers, and our pricing is only as good as that information. The more detailed information we have, the better positioned we are to take the risk to our carrier and fight for good pricing."
Mr. Alkire provides some important advice to any retail agent who is contemplating writing taxicabs. He says, "You must be extremely detailed in your record keeping. Make sure the insured signs off on everything. Multiple vehicle changes create the need to stay on top of your billing and collection department. Money up front is extremely important due to the nature of the business. Understand the carrier's policy terms and conditions as they relate to drivers and vehicle changes."
Getting the right coverage with the right carrier for the right price may require that all parties just slow down a bit!
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