Limo Service Gets a Break
Jackson Limousine Service, which considered closing last month when it learned that its car insurance rate would jump 370%, has found that California’s hands-off approach to insurance regulation--which allows firms to charge whatever the market will bear--has its bright side, too.
E. J. Jackson, owner of the Los Angeles-based limousine service, had received notice Dec. 10 from National Indemnity Co. of Omaha that his annual insurance premium was being increased to $53,000 from $13,453 because of state-mandated higher insurance coverage minimums and because Jackson’s drivers had three accidents in 1983.
But after publicizing his plight, Jackson was deluged by telephone calls from agents eager to offer him lower insurance rates. He accepted an offer from Scottsdale Insurance Co. in Scottsdale, Ariz., to insure 14 of his cars for about $18,000 a year.
“I got about 25 calls on Christmas day,” Jackson said incredulously. “They said my loss record wasn’t bad at all.”
Added Jackson’s accountant, Velma Union: “The $32,000 we’re saving is a good six to eight months’ operating capital. They (Scottsdale) saved our lives.”
Like many small- and medium-sized limousine companies in California, Jackson’s insurance problems stemmed primarily from a decision from the state Public Utilities Commission to more than double the required minimum accident and liability coverage that operators must carry, to $750,000 from $350,000. The increase, effective Jan. 1, was the first since 1969.
His rates also were affected because he enlarged his fleet, and because National Indemnity began curtailing certain renewal and driving experience discounts.
But Ron Geller, the insurance agent who wrote the new policy, said Jackson’s good fortune may not last long.
“We’ve been in what’s called a soft market for the last six years--a situation where insurance companies can make more money in the money markets than in insurance,” Geller said.
As a result, Geller said, insurance companies could afford, for example, to pay out $1.22 in claims for every $1 they took in because of the money they earned from investments.
But as interest rates level off, Geller said, more insurance companies will join National Indemnity and drastically increase insurance rates to compensate for the investment shortfall.
