In Need of a Lift: Taxi and FHV Businesses Stall on Way to an Insurance Solution
FHV sector. Commercial Auto Industry is Bleeding Thanks to Rising Costs of Drivers, Rampant insurance Frauds & Regulatory Abuse.
By Kamal Ahmed
New York City’s For-Hire Vehicles (FHV) industry is witnessing multifarious snags mainly due to the rising costs of drivers, widespread insurance frauds, regulatory abuse and imbalanced opportunity, impacting the livelihood of taxi and ride-share drivers while putting the insurers’ Risk Management Solutions (RMS) strategies in dire peril.
Presently over 200,000 drivers operate around1,000,000 rides each day in New York City, the largest metropolitan area in the world. The drivers– medallion (yellow) taxicabs, green taxicabs, black cars (both traditional & app-based services), community-based livery cars, commuter vans paratransit vehicles and some luxury limousines.
The Taxi and Limousine Commission (TLC) is the license issuance authority. American Transit Insurance Company (ATIC), which provides specialized coverage for livery and commercial auto insures 65% of NYC’s for-hire vehicles followed by Hereford Insurance Company (19%), Affirmative Direct (5%), Accident Fund Insurance Co. (7%), Maya Assurance Co. (2%). All others – each has 1% or less, according to the TLC’s insurance database.
It makes complete sense that – the current ‘all-time high inflation impacts businesses by driving up the costs of materials and products. This ultimately leads the FHV drivers suffering badly in absence of strong social safety net, that could provide better healthcare and education supports for their families.
This correspondent interviewed a number of drivers and tried to analyze factors behind the rising costs of drivers and factors that drivers the costs and how they affecting every aspect of their life. Drivers say it look like the industry stakeholders, including insurance carriers, are in the race to hike their fees and rates phase by phase, brushing aside their affordability.
For a start, a driver has to count numerous fees ($200-350 for education and exams) for TLC and DMV while $1,215-1,615 (for buying a car too). In addition to that, other required expenses include: gasoline, car washes, parking, TLC and traffic tickets, tolls, vehicle maintenance, car lease payment, healthcare costs, smartphones and meals on the road. Starting from Jan 5, 2025, drivers will also have to count additional charges ($1.50 per ride for app-based cars while $0.75 for traditional taxis and black cars) for congestion pricing imposed by Metropolitan Transportation Authority (MTA) on January 5, 2025.
“More expenses, less opportunity,” said Mr. Alamgir Kabir, an Uber driver.
In an interview, Mr. Kabir said, it seems the drivers are being financially drained from all angles. “By all accounts, drivers fare the worst in the face of rising costs as a result of the elevated inflation and interest rates. “The regulatory agencies and insurers are increasing the fees and rates without bringing improvement to the social economic situation,” he said adding that new drivers have to think twice before entering into the TLC market due to countless expenses. “Driving Taxi is no longer a lucrative job…we work hard for the sake of our families but we are not even recognized as employees which is painful.
Uber and lift take almost 50% (including surcharge, Black Car Fund, Sales Tax) of a trip, he further added.
“The city even does not have adequate arrangements of public toilets for the drivers. We are experiencing serious health hazard in absence of available public toilets. “Before we used to enter hotels to use bathrooms and now none give us access to use that which poses a major health concern.” Mr. Kabir pointed it out.
MD Moinul Hossain, another driver who works with a base, said as promised by TLC one year ago to allow use of the UBER app, he purchased an electric vehicle (Tesla) but he is yet unable to use UBER app as per the TLC decisions. “I pay $120 per weeks my base no matter whether working or not. He calculated a series of his costs – $500 per month, $700 for monthly car payment while insurance premium $350. “I do not get paid for wait time with Uber and Lyft and also when we return without a customer on completion of rides, no matter how far I drive.” Mr. Hossain, who drive since 2020 with zero accident record, put forward a set of recommendations to benefit the drivers like inclusion of health insurance, 401K to encourage young people to join the industry.
“TLC can provide bonus for us based on rides clean accident record,” he suggested. Referring to his broker, he said he is not getting services as expected. “My broker contacts me once in every six months just to inform my insurance rates and rest of the time there is no communication unless accident happen. “Broker charges fees but in return we do not get any sort of services…we are willing to pay services but we expect services.”
Mr. Sumon Modak, an Uber driver who does not driver anymore, quit the driving last year following an accident. “I was in the red light when got hit from behind…I had to suffer a lot as a result of the accident including paying so many costs and also court hassles and mental distress. I was depressed thinking how could I to run my family amid these situations…finally I decided to surrender my TLC plate and quit driving. “TLC is a headache…yearly renewal is expensive which many drivers can’t afford,” he added.
Syed Mamun Ali, another taxi driver, expressed disappointment over the escalating of costs saying taxi and ride-share drivers are already burning as a result of the rising costs and on top of that app company Uber Inc. has, of late, brought down the lowest ride to $4 from $5.39 which is hurting us.
This correspondent had the opportunity to reach out to industry insurance company executives to obtain their comments on the issues of in New York’s taxi and FHV industry. One executive said, “we believe the hardworking drivers in New York are suffering because of high-cost ratios that have gone out of balance with the drivers’ economic returns and opportunities”. “After all is said and done, the most important factor influencing road safety and quality of service is the driver. Drivers who are under stress and overworked are poor performers from a risk standpoint.” “We need to correct the paradigm so that drivers can work safely and make a healthy living. “
On Dec 17, 2024 ATIC filed a lawsuit for over $450M, naming over 180 defendants in New York and New Jersey. Sources said that may more medical and legal practitioners could be similarly named. American Transit’s lawsuit seems to show how fraud has become pervasive and normalized in this space that was originally meant to be helpful to injured parties. It shows that, even with a small portion of providers, abuse in the No-Fault system can yield a huge number of Racketeer Influenced and Corrupt Organizations (RICO) charges.
“Insurance brokerages have advantages, the vehicle and permit leasing companies have their advantages, as do the bases too…everyone has their respective advantages. If the drivers are exploited, the simple answer is his or her (driver) leverage is out of balance with everybody else. Every driver’s situation is different. There may be 100 different situations that thousands of drivers find themselves in. There are hundreds of different answers how to improve the drivers as a group. What we are doing if we can’t go after every driver’s problem, individually? How can we fix your situation when even if we can do that today, a new problem is going to keep coming up, because of the system which is out of balance.” said the carrier sources.
Mr. KJ Singh, President and Chief Operating Officer (COO) of Maya Assurance Company, which provides insurance for commercial vehicle, livery and non-emergency medical transport insurance, said currently, there is a significant crisis in the NYC TLC insurance industry and things must change. “If not, the new generation of drivers will bear the burden and the costs. In his recent article published in the insurance magazine dubbed’ BLACK CAR NEWS’, Mr. Singh said insurance companies can’t survive or new ones enter the NYC TLC insurance industry under the current New York No-Fault Regulations 68 and current-pricing.” “The very well organized, targeted and abusive claims are the cause of hundreds of millions of dollars in losses to the insurance companies. There is no healthy balance in the insurance industry, he said adding that “The free market works best when things are in balance for the benefit of everyone. Currently there is no balance,” he said in the article published on Nov 29, 2024.
The Maya President underscored the need fora strong commitment of drivers for a healthy balance in this industry. In doing so, he favored a combined efforts of insurance industry, DFS Governor’s Office and other elected officials should to make an adjustment in Regulation 68to put an end its abuse. ““At the same time, it also must provide safeguards and protections from the organized abuse. “A newfound balance will result in a healthy insurance industry, thus reducing costs to For-Hire drivers and still providing protections to the public, policy holders and claimants,” said the company executive.
Keith Greenbaum, executive of the second largest insurance carrier in this space, Hereford Insurance Company, stressed the importance of creating a stable, competitive, and healthy insurance marketplace for the entire for-hire industry. While testifying at the just-passed TLC public hearing (Dec 11, 2024), Mr. Greenbaum stressed the need to stop the bleeding so there is no further insolvency issues in the sector through adequate actuarially determined rates to incentivize and encourage other carriers to enter into this marketplace.
This correspondent also testified in this hearing, giving a rundown of his community drivers depicting how they are suffering from the rising costs and insurance frauds and put forward a set of recommendations including TLC’s interventions on enacting industry-friendly laws for the sake of the hard-working drivers, which will not only help improve the livelihood of the drivers but also bring discipline in this industry.
The bottom line is that it’s an opportunity issue…It’s all about imbalanced opportunities. If drivers a subject to higher costs, beyond their control, either by inflation, regulation, or at the hands of other industry stakeholders with more leverage, then there should be requirements to also improve the drivers’ opportunities to earn more money. Even with better opportunities, should drivers be forced to bear an unfair share of the financial burden brought about by unchecked insurance fraud?
Kamal Ahmed
Mr. Ahmed is an insurance consultant, journalist at large, with experience at local & foreign news agencies and journals. He is actively involved in involved in finance, insurance and technology.
