Taxicab market: limousines’ ugly stepsister?

Specialized taxicab market may not be glamorous, but can be as good as any other account

As an agent you may receive a request to provide insurance for a limousine operation from time to time. Limousines conjure up an image of glamour and upscale clientele — just the kind of account many carriers like.

But what happens when you get a request to insure a taxicab operation? They are often unfairly seen as the ugly stepsister to the Cinderella-like limousine account.

The taxicab industry has been a much maligned and misperceived market. Stereotypes abound and anecdotal evidence would lead you to believe that the word “taxi” is indeed a four letter word. While there is always a kernel of truth behind any stereotype, a taxi account can be as good as any other account your agency may write.

Price is key
Yes, price is key (as with any account), but with limited markets writing this class of business, canvassing the available marketplace is relatively easy. One of the results of this limited marketplace is underwriter expertise and familiarity with the account. In addition, the carriers that write taxicab insurance are for the most part the ones that wrote it in the past. They have decided to support this industry and have done so through both hard and soft markets.

The Scottsdales, Essexes, National Indemnitys and American Countrys of our world know the industry and feel comfortable underwriting the exposures. For the larger accounts, especially those with large retentions or deductibles, large account departments and additional markets are always available. Service is also important because without timely and properly issued identification cards and certificates many cab operations will be shut down by the local authority overseeing their operation.

So if you look at a taxicab account as one that may require slightly different handling than your standard contractor’s automobile, you should do just fine.

Key items for typical taxicab accounts
Know the limits required by the entities governing the taxicab operation or where they have authority to operate. The city, county, or airport authority all may have different limit requirements, some of which may seem inadequate from an insurance standpoint. Rarely, cities require $1 million in coverage. They have ranged from as low as $15,000/$30,000/$5,000 up to $1 million combined single limits. Be prepared to work with an insured who will only buy the minimum limit required. There are taxicab insureds that see insurance as a bureaucratic requirement of operating, not as protection for their company.

Know the coverages required. As in the case of the limits above, many taxicab operators wish to only carry those coverages they are required to carry by the governing authority, typically automobile liability and UM/UIM coverage. Physical damage coverage is usually only carried when a lender or leasing company is involved. Since they don’t carry higher limits umbrellas or excess coverage is not often purchased.

Since the drivers are typically not employees, workers’ compensation usually only involves clerical exposures. There are products offering AD&D coverages for drivers to help address this issue. General liability for the office and dispatch exposures is usually purchased and is typically inexpensive.

Accuracy of the vehicle fleet. Since many carriers that provide insurance for taxicabs will do so on a scheduled vehicle basis using Symbol 7 only, vehicle fleet lists and additions are key to ensuring coverage is provided correctly. If a municipality asks for Symbol 1 coverage many times Symbols 7, 8 and 9 will be acceptable.

Accuracy of the driver’s list and MVRs. At one time there were scheduled driver policies written but they are no longer seen. However, a carrier’s driver guidelines are important and may be very stringent. This can create serious problems if a driver’s MVR does not meet the carrier’s requirements. Communication of these guidelines to the insured is of utmost importance. The insured should be provided a copy of the guidelines and be reminded that when evaluating a new driver they should review them to make sure the driver complies.

Deductibles and self insured retentions.Due to issues with collateralizing and collecting smaller liability deductibles ($1,000 and less) they are no longer used as they once were. Those accounts wishing to take larger deductibles ($25,000 and above) will discover that collateral may be required by the carrier for these deductibles. Such collateral will be negotiated on a case by case basis. The insured who does provide collateral needs to understand how that collateral will be released (and when) by the carrier as losses are paid; and that it may be increased as loss experience changes. Insureds wishing to utilize a self-insured retention may often be required to be qualified self-insureds and produce a certificate from their state.

Carrier rating. Many authorities that oversee taxicab operations don’t specify a rating for carriers insuring taxicab operations. I have seen taxicabs insured by carriers with no rating, up to those with an A++ XV rating. In addition, using non-admitted carriers brings up the issue of guaranty fund protection, or the lack thereof, which should be explained to the insured.

Taxicabs are not difficult to write, just a little idiosyncratic. Their views of insurance may seem at odds with a fully featured insurance program, but with consistent communication they can be excellent long-term clients.

Scott Crouch is vice president and program development coordinator for Crump Insurance Services Inc. in Dallas, Texas. In his 20-year insurance career, he worked for Chubb Insurance Co., as a retail agent, wholesaler broker and managing general agent, and has been providing insurance to the taxicab market for more than 10 years.

Topics Carriers