Nonprofit Carshare Insurance FAQs
For nonprofits in New York, finding auto insurance is a struggle.
For Ithaca Carshare, it’s a crisis.
The reasons are twofold: New York is one of only 13 states that requires PIP (Personal Injury Protection), or no fault insurance in order to register a vehicle. This means an insurer will pay medical bills from an accident, regardless of whether the driver was at fault. New York has the highest minimum required amount of PIP in the country at $50,000.
This makes finding insurance difficult enough, as premiums tend to be higher in NY due to PIP, but there is more to this as well.
The other reason is that certain insurance groups, called Risk Retention Groups (RRG), are blocked from writing auto insurance in NYS due to state laws and regulations imposed by New York insurance regulators.
These laws and regulations prevent RRGs from writing auto insurance in NYS unless they are domiciled here. This problem is unique to New York State, as federal law explicitly allows RRGs domiciled in one state to write automobile insurance in other states.
Ithaca Carshare has been insured for 15 years through the private insurer Philadelphia Insurance, but they are pulling out of the NYS carshare market. Our insurance with them ended May 22, 2023. There is an RRG willing to write insurance for us (Alliance of Nonprofits for Insurance, RRG), but they are not domiciled in NYS and so are blocked by the DFS regulation.
It’s a complex issue we’ve been working to address for months, so we’ve compiled this list of FAQs in order to help the public better understand.
What exactly is a carshare?
Carshares are community-focused, membership-based services that provide access to cars for local trips to people who can’t or choose not to buy their own vehicle. Carshares reduce vehicle emissions as members generally combine carsharing with public transit, bicycling, and walking. Nonprofit carshares, such as Ithaca Carshare, also provide access to transportation for low-income people through our Easy Access program.
Why can’t Ithaca Carshare get auto insurance?
Carshares are seen as risky by insurance companies, and most private insurance companies don’t want to write auto insurance for carshares with smaller fleets, such as Ithaca Carshare.
There is an insurer willing to write coverage for us, but they are a nonprofit Risk Retention Group (RRG) not domiciled in NYS, and the Department of Financial Services disallows RRGs to write auto insurance in NYS unless they are domiciled in the state.
What is a Risk Retention Group (RRG)?
According to The National Association of Insurance Commissioners (NAIC), Risk Retention Groups are liability insurance companies owned by its members. A good analogy is to think of RRGs like Credit Unions and insurance companies like banks.
RRGs allow businesses with similar insurance needs to pool their risks and form an insurance company that they operate under state regulated guidelines. RRGs are formed using a combination of state and federal laws under the auspices of the Federal Liability Risk Retention Act (LRRA).
RRGs are held to the same solvency standards as commercial insurance companies nationwide.
Read more: https://content.naic.org/cipr-topics/risk-retention-groups
What is Ithaca Carshare doing to get auto insurance?
We’ve been searching for insurance through our agent, Porter and Curtis, for several months. They advised us that we’d be more appealing to insurance companies if we partnered with other carshares, so we formed an LLC with Mobility Development Operations, who manages the other carshares in New York (in Rochester and Albany, and soon-to-be launched in Buffalo), as well as several throughout the country. Even with this larger contingent of carshares, so far we’ve been unable to obtain insurance from several companies due to the requirements in New York.
Meanwhile, we’re also working on a legislative fix. Ithaca’s assemblymember Anna Kelles and senator Lea Webb have introduced a bill (A.5718/s.5959) that will amend New York’s insurance and vehicle and traffic laws to allow RRGs to write auto insurance for 501(c)(3) nonprofit organizations in New York.
UPDATE: the bill passed the legislature in June, and Governor Hochul signed it on September 15, 2023.
Why can’t RRGs write auto insurance in NYS?
The Department of Financial Services interprets federal law allowing RRGs to mean that RRGs must meet a fiscal responsibility of being chartered in New York.
What are the objections by NYS insurance regulators to RRGs?
Insurance is regulated in New York State by the Department of Financial Services (DFS), who also regulate banks. In April, we received a list of four concerns from DFS. The following PDF includes their concerns and our responses to those concerns:
https://www.ithacacarshare.org/wp-content/uploads/Responses-to-DFS-concerns-to-A.5718_S.5959.pdf
On May 31, DFS shared another list of concerns with Anna Kelles. The concerns are less about the bill itself and more about the Alliance of Nonprofits for Insurance (ANI), an insurance company that is formed as a Risk Retention Group. Our response to those concerns are here:
https://www.ithacacarshare.org/wp-content/uploads/Anna-Kelles-Response-to-DFS-Concerns-Re-A.5718-.pdf
How many carshares are there in New York State?
Ithaca Carshare is the only nonprofit carshare in New York State. Other carshares in NYS include Floshare in Rochester, Drive CDTA in Albany, and a soon-to-be launched carshare in Buffalo. These three carshares aspire to be nonprofits, and there could be a lot more funding from NYSERDA to start nonprofit carshares in the state if RRGs are allowed to write auto insurance for nonprofits. For example, we know of folks in the Hudson Valley trying to get a carshare off the ground, but can’t find insurance.
How do other NYS carshares get auto insurance?
Lacking the ability to get coverage through an RRG, the temporary solution for Rochester and the Capital Region is for vehicles to be owned and insured by Envoy Technologies, a venture-funded technology company headquartered in California that makes carsharing software.
What will happen to Ithaca Carshare if they can’t get insurance?
Our insurance ends on May 22, 2023. We’re trying to find insurance on the free market, but most companies don’t want to write auto insurance for small carsharing organizations in New York like ours due to the risk. It’s possible we will have to close or pause operations as of May 23, 2023.
Have there been other nonprofit carshares in NYS? What is the history there?
Yes, and they all have been forced to close due to the insurance issues. You can read the history of nonprofit carsharing in NYS here (PDF): https://www.ithacacarshare.org/wp-content/uploads/The-History-of-Insurance-for-Nonprofit-Carsharing-in-New-York.pdf
What is the NYS Department of Financial Services’ position on RRGs?
The US Liability Risk Retention Act (LRRA) (15 USC Ch. 65) of 1986 establishes RRGs “whose primary activity consists of assuming, and spreading all, or any portion, of the liability exposure of its group members,” and “which is chartered or licensed as a liability insurance company under the laws of a State and authorized to engage in the business of insurance under the laws of such State.”
In short, the LRRA allows RRGs to be licensed and admitted in any of the 50 states to be authorized to do business in all states.
In an April 17, 2006 opinion of this issue, the NYS Office of General Counsel, (OGC) representing the Department of Financial Services (DFS), identifies in NY Insurance Law Article 59 § 5913, that RRGs must meet a fiscal responsibility of being chartered in New York.
Virtually every other state has “insurer duly authorized to transact business in this state” included in their laws for financial responsibility. The difference between NYS and every other state is that NYS DFS has made the determination that they are going to interpret this to mean insurance companies domiciled in NY whereas every other state has recognized that the LRRA supersedes state law and that NYS’ reading of “authorized” as “admitted in (domiciled as opposed to approved) the state” is not appropriate.
Why does NYS not have auto insurance RRGs?
Our understanding is that NYS does not want to allow RRGs to write auto liability, with the assumption that they may not have the appropriate capital backing. This is a spurious argument since RRGs must abide by the same Risk-Based Capital standards as commercial insurance companies. Nonetheless, regulators have shown concern that New York City taxicabs may want to use RRGs which may expose them to a collapse of collective liability if they are mismanaged or fraud is involved, which is true for any market.
Does this issue affect other nonprofits in NYS?
Yes. According to the New York Council of Nonprofits (NYCON), most commercial insurance carriers will not consider any nonprofit that has volunteer drivers, or transports elderly, children, medically fragile, or disabled people. With a nonprofit RRG in the state, all nonprofits with exposures not readily insured by most commercial carriers will be able to obtain auto insurance for their programs.
Wouldn’t allowing non-domiciled RRGs reduce auto insurance standards like PIP
No. The Alliance of Nonprofits for Insurance, RRG (ANI) offers commercial insurance for nonprofits in 31 States and DC. They meet all requirements for coverage in all those states including PIP, when required. They have written commercial auto in most of these states for decades with no market disruption. They tend to ensure vehicles with exposures not readily insured by most commercial carriers, such as volunteer drivers, transportation for medically fragile, elderly, and children. All rates charged by the RRG are consistent with actuarially sound principles and practice using ISO rates and forms in compliance with state laws.
ANI holds an A (Excellent) IX AM Best rating. They charge actuarially sound rates and use ISO rates and forms like other commercial carriers. The difference is their ability to underwrite nonprofits that do not fit the underwriting guidelines of many commercial insurers. They must maintain Risk-Based Capital standards like any other commercial insurer and have no ability to undercut the commercial market. They provide coverage that is either not easily available in the market or not accessible to local community-based insurance brokers and agents. Operating as a 501(c)(3) nonprofit, ANI has an open book on its financials and has no outside investors to satisfy. Their mission is to provide stable, reliable, and secure insurance to our nonprofit members.
I have another question not answered here.
Please contact Ithaca Carshare director Liz Field at liz@ithacacarshare.org.