Mexican Drivers and Firms Worry About U.S. Insurance

Chris Dobken, a U.S. citizen living in Tijuana, is concerned about getting car insurance.

Oscar Legaspy, who runs a transport company in Ensenada, is worried about obtaining U.S. insurance for his trucks.

And Oscar Padilla, a San Ysidro insurance broker, is nervous about his business.

All three men are perturbed about the decision of three U.S. insurance companies in California to cease issuing policies for vehicles--both commercial and passenger vehicles--that are housed in Mexico. Though the full impact of the move has yet to be felt, officials and others in the United States and Mexico voice fears that it could severely disrupt commerce along the U.S.-Mexican border in California, a vibrant trade zone.

Each year, about 12 million vehicles enter the United States from Mexico via San Ysidro, many of them bearing Mexican license plates.

“We definitely feel that this is very detrimental for trade and tourism between Mexico and the United States,” said Javier Escobar, Mexico’s consul general in San Diego, who has informed Mexican officials of the situation.

U.S. Officials Worried

Escobar’s comments were echoed by U.S. officials, who also voiced another fear: The problem could lead to an increase in uninsured drivers in border areas such as San Diego County, where sky-blue Baja California license plates are common. Ultimately, a rise in accidents involving uninsured drivers would be reflected in higher U.S. insurance premiums for area motorists.

“It’s a serious situation,” said Francisco Herrera, director of binational affairs for San Diego.

Though the border crossings with their long waiting lines may be annoyances to tourists, the fact is that they are vital economic links between the two nations. That point was underscored most dramatically by the near-depression that engulfed U.S. border areas during the great peso devaluations of 1982, when the plummeting peso exchange rate forced many Mexican shoppers to abandon what had become traditional shopping sites on the U.S. side.

Shoppers from Mexico are still believed to spend hundreds of millions of dollars annually at San Diego-area businesses. Mexican trucks, meanwhile, transport huge volumes of valuable goods each day through the border, as witnessed by the long lines of trailers waiting to cross into the United States via the Otay Mesa entry port. Each weekday about 750 trucks on average cross into California from Mexico, transporting annually an estimated $2 billion worth of merchandise, according to the U.S. Customs Service. In theory, the problem could lead to higher prices for U.S. consumers who purchase fruits, vegetables and other items from Mexico.

“I think it (the trade) is more important than most people realize,” said Herrera.

Risk Pool May Be Needed

Should U.S. insurance be made unavailable to Mexican-registered motorists, the potential for disruption is so acute that state Sen. Wadie Deddeh, D-Chula Vista, has suggested that state legislation may be needed to create some kind of assigned-risk insurance pool for Mexican drivers, similar to the program now available for high-risk drivers. “We’ve got to find some kind of solution to this,” Deddeh said in an interview from Sacramento.

However, Deddeh acknowledged that such legislation could not even be introduced in the state Legislature until January at the earliest. Moreover, any plan to create an assigned-risk pool for Mexican drivers is likely to run into strong opposition from U.S. truckers and their allies, who fear a “subsidy” for foreign competition.

“I think it (an assigned-risk pool for Mexican drivers) is a terrible proposal,” said Assemblyman Larry Stirling, R-San Diego, who was a sponsor of a law three years ago that imposed several restrictions on Mexican truckers. The legislation was spurred in part by anger that U.S. truckers are not allowed to operate in Mexico, while Mexican transport firms regularly ship produce in the United States.

Meantime, business leaders and others on the U.S. side are busily attempting to avert a crisis by seeking an alternate insurer for Mexican-based vehicles.

Affected by the insurance snafu are both individual drivers--including Mexican nationals and U.S. citizens living in Mexico--and Mexican truckers who cross the border daily. The vehicles must be insured to operate in California, but Mexican vehicle insurance is no good north of the border--just as corresponding U.S. policies don’t apply south of the border. The purchasing of Mexican insurance is a time-honored ritual for U.S. tourists and shoppers entering Mexico.

Tens of Thousands Insured

No one knows how many Mexican vehicles have made use of the U.S. insurance, but the number is surely in the tens of thousands, according to industry officials and others. The border crossing at San Ysidro is considered one of the world’s busiest ports of entry--if not the busiest.

For a number of years, the vehicles’ owners have been able to obtain insurance from three U.S. carriers--Industrial Indemnity Co., Maryland Casualty and the Canadian Insurance Co. of California, formerly known as Canadian Indemnity. However, beginning late last year the companies began notifying clients that the policies would not be renewed, apparently because the companies were suffering substantial losses. Now, as the policies expire, clients are scrambling to find alternate insurance.

“It was a completely unprofitable business,” explained Robert Dowd, a spokesman for San Francisco-based Industrial Indemnity, the only representative among the three insurance firms willing to discuss the situation with a reporter.

In 1986, Dowd said, Industrial Indemnity collected about $1 million in premiums for between 2,000 and 3,000 policies for both commercial and non-commercial vehicles housed in Mexico. However, the company lost $200,000 on the program, Dowd said. In 1985, he added, the loss was even greater--a loss of $350,000 on $800,000 in premiums.

“Those numbers say that something was wrong,” Dowd said.

Thus far, officials say, the effect of the insurance problem has been more prospective than real. They cite the fact that many of those affected still hold valid policies--policies, however, that will soon expire and will not be renewed.

Oscar Legaspy finds himself in such a bind. Legaspy, general manager of Transportes de Carga Ensenada, an Ensenada trucking firm that hauls vegetables and other products to the United States, said his firm has paid annual premiums of about $37,000 to Maryland Casualty for U.S. insurance on various vehicles. However, the polices are scheduled to expire on Feb. 2.

“We haven’t decided what we’re going to do,” Legaspy said by telephone from Ensenada. “We may have to sell some trucks. Without the insurance, we can’t ship to the United States.”

Other Mexican trucking firms that ship to the United States face a similar quandary.

“It’s an urgent situation for them,” said Guillermo Dominguez, an insurance broker in Ensenada who managed a number of U.S. policies for truckers and motorists. “They’re uncertain about the future.”

Chris Dobken is also uncertain. One of the more than 30,000 U.S. citizens who reside in Baja California, Dobken has found himself unable to get car insurance. Dobken, who runs a consulting firm for Tijuana’s bustling maquiladora, or twin-plant, assembly industry, says the U.S. policy on his personal car expired last week, posing a serious problem during his daily trips to the United States.

“I’m 54 years old, and today is the first day in my life that I’m driving as an uninsured motorist,” Dobken said on Wednesday. “I was driving rather slowly.”

Some Insurers Gouging

Because of the problem, some insurance brokers are reported to have demanded excessively high premiums to insure vehicles housed in Mexico. “I understand that some companies are gouging rates out of people,” said Oscar Padilla, a San Ysidro broker and one-time agent for Maryland Casualty who has seen his business plummet because of the problem.

Despite the potential severity of the matter, officials and other border-watchers express hope that other U.S. companies can be persuaded to pick up the coverage recently dropped by the three firms--and to charge reasonable rates. A number of businessmen are currently involved in negotiations with unnamed insurers with an eye towards averting a border crisis.

“It’s something we’ve been concerned about, but I think we’re going to be able to work it out,” said Alfonso Bustamante, president of the Tijuana Conventions and Visitor Bureau. “The border commerce is just too important.”