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Thursday, February 08, 2007

Zipcar insurance, part 2

Last August, I sent an email asking Zipcar to clarify their insurance situation, and received no reply. In September, I blogged the issue, and still got no response. Then, yesterday, I got a comment on that blog which seemed to confirm all my suspicions. I decided to try Zipcar one last time: this time, I sent an email to their PR agency.

And this time, they responded. Not just with their own comment, mind you, but with a fully-fledged conference call between me and three Zipcar employees, all of whom wanted to explain their insurance setup to me.

Zipcar has now confirmed that they do not provide any liability insurance beyond the minimum levels they're mandated to provide by the states in which they operate. In the case of my commenter Martin, that minimum was $5,000 – which meant that after he caused $19,255 of damage while driving a Zipcar, he was responsible for paying $14,255. If he'd been responsible for any kind of personal damage requiring hospitalization, then his liability could have been orders of magnitude greater.

Zipcar told me that they're going to make it much clearer on their website that their liability coverage is pretty weak; this fact has been very, very buried up until now. They also told me two other things I should pass on: firstly, that only a tiny proportion of Zipcar drivers who get into accidents end up with damage over the state minimum – they say it's much less than 1%. And secondly, no one is ever liable for anything unless they're found to be negligent or at fault in the accident.

Nevertheless, I have a number of issues with the way that Zipcar handles this issue, and not only with the way in which they have buried it on their website.

Firstly, they tend to take a very legalistic view of their responsibilities to their members. Martin complained, in his comment, that he might well have been able to file a claim with his credit card – but that he didn't find out until six months after the event that he owed this money, and that at that point the 30-day time limit for filing a credit-card claim had long expired.

I asked if at any point in his dealings with Zipcar – and there must have been quite a few, since he got into a serious accident in their car – they explained to him that he might be liable for excess damages over $5,000. Oh no, they said, it wasn't their job to do that, since they wouldn't be making the claim: rather, it was entirely up to the other car driver's insurance company whether they made a claim on Martin. The actual Zipcar quote? "It's irresponsible to tell someone that they will have a huge financial obligation". Well yes, it's irresponsible to tell someone that they will have a huge financial obligation. But it's not irresponsible to tell them that they might have such an obligation, if damages turn out to be more than $5,000. In fact, it's the least that Zipcar could have done.

Secondly, if anybody works out that renting a Zipcar gives them huge potential liabilities if they get into an accident, they're told, to quote the comment on my blog:

If our policy does not meet the needs of members/potential members, we encourage members to contact insurance brokers in their state to learn about additional options that are available.

Again, this is not helpful. What's more, buying liability insurance costs some $300 per year – four times the cost of Zipcar membership. I don't know how many times the average Zipcar member uses the service, but in my case it's maybe once every two months – which would mean that I was paying $50 per trip for that insurance.

I was also told, on the phone, that Zipcar was hesitant to provide more insurance coverage because that might be very expensive: "Our main goal is to keep prices affordable," said Zipcar's Kristina.

Now this is where I start getting confused. If much less than 1% of accidents cause damage which goes over the state minimum, then the total cost of all that extra liability simply can't be all that great. It can't be big enough to justify a $300 annual premium – that's a premium suitable for people who drive every day, which takes into account all the adverse selection problems associated with the type of people who are likely to buy liability insurance. If I were Zipcar, I'd look at the numbers for the past few years, and work out how much it would cost to insure or even to self-insure the liability, at least up to the kind of limits that rental car companies and insurance agencies offer. If most drivers don't get into accidents, and over 99% of drivers who do get into accidents don't cause damage over the state minimum, then, really, how much money are we talking about here, divided between 80,000 members?

But let's say that if that extra cost was incorporated into the Zipcar rental fee, then rentals would become too expensive. What should Zipcar do then? The answer's obvious: Do what the rental companies do. They don't force you to take liability insurance, but if you want it, you can check a box, and – presto – you have it. Zipcar could do the same thing: When you reserve your car, simply check a box, and you'll pay an extra 25 cents per hour or whatever it would be, thereby getting liability coverage and safety of mind.

Zipcar is apparently looking into this issue, and I hope they implement either much stronger liability coverage across the board, or at least some kind of opt-in system.

If I were being cynical, I'd say this: Zipcar has known full well about this issue from day one. But their sales pitch is simple: one fee, and we'll take care of everything, including gas and insurance. Check out the page entitled "Is it for me? Compare to Car Rental":

Everything is included
Gas, reserved parking and insurance are included in all of our rates and there's no crazy paperwork and waivers to fill out.

It's hard to tell prospective members that insurance is included, and then to ask them to pay for insurance. Better to fudge the issue, as they have done up until now: say that insurance is included, and never really mention that "insurance" doesn't include liability insurance beyond the state-mandated minimum (which you also get from any car rental agency).

I find it fascinating that Zipcar and car rental agencies take completely opposite tacks on this issue: they both provide exactly the same minimal level of liability insurance, and they've both tried to hide that fact: the car rental companies because they want to upsell more insurance at a profit, and Zipcar because they want to seem different to the car rental companies.

On the other hand, maybe I shouldn't be cynical about this at all, and Zipcar just made an honest mistake, and they're doing their best to correct it. I look forward to seeing what they do, if and when they do it.

UPDATE: I've now determined that Zipcar is acting in bad faith. See part 3 for all the details.

Posted by Felix at 23:53 EST

Comments

"you can check a box, and – presto – you have it."

You have what, exactly? Practically everyone opting for rental car liability insurance (or the damage waiver) on the spot doesn't know, as you point out, what kind of insurance they already have by law. Nor do they get a very good idea of what they're adding on from the thirty second sales pitch. (The three pages of fine print they couldn't possibly read at the counter have some pretty significant exceptions for coverage.) However wrong Zipcar is, the typical rental insurance hard-sell is no model of fairness.

Posted by: Doc Barnett at 13:01 EST, February 09, 2007

Here’s something else ZipCar doesn’t want to tell you: ZipCar does NOT provide Uninsured Motorist Coverage. More importantly, it took me 12 weeks to get this answer from ZipCar.

The lack of full coverage actually doesn’t bother me so much: I’d gladly buy my own. What concerns me is that it’s virtually impossible to get this information from ZipCar.

My wife & I considered joining ZipCar instead of owning a car in the Boston area. We’ve long debated the pros and cons of living car-free, but we never could make the jump. Zipcar seemed to address all the “what ifs” -- what a great concept. Eureka!

Before posting our 1998 Honda Civic for sale, I looked into ZipCar’s insurance coverage, since ideally we’d drop our own. We couldn’t find the answers on ZipCar’s website, so I e-mailed on 11/22/06. No answer. The following week I e-mailed a second time. No answer. How frustrating! Then a third time on 12/12. At this point, I not only had questions about ZipCar’s insurance, but also growing doubts about its customer service. Giving up our car – and our insurance – would have been a major lifestyle change, yet we couldn’t even get a simple response.

Finally, I called – ah ha! I finally got an answer, 12 weeks after my initial e-mail… but the INCORRECT answer. ZipCar’s staff told me that Uninsured Motorist Coverage WAS included. Only when I called back and pressed the issue did I finally get the truth, though veiled as follows: “You can sue the other driver if he has no insurance; ZipCar doesn’t get involved with that.”

Um… uh… You mean… No?

Why is “No” such a hard word? “No, we don’t provide full insurance.” Period. I pressed but couldn’t elicit the “N” word. With ZipCar’s website guaranteeing that “everything is included”, you might get the impression that, well, everything is included. Not so. It must be hard to say “No” after over-promising.

The answer also contradicts what ZipCar told Felix in their phone conversation: “[N]o one is ever liable for anything unless they're found to be negligent or at fault in the accident.” This isn't true. The truth: if an uninsured motorist hits you while you're driving in a ZipCar vehicle, you’re liable.

I also found Felix's post fascinating. I had no idea that ZipCar’s insurance is no different than the coverage rental agencies provide automatically, though ZipCar calls it "fully insured", while the rental agencies characterize it as "no insurance". (And to bat, ZipCar even claims this is a differentiating factor!)

In my opinion, Zipcar deliberately misleads and conceals. It's frustrating for me (thanks for space to vent!), since otherwise I think car sharing could actually work for us.

We’re still debating whether to keep our car. The T is just two blocks away! But a car just makes life so much easier sometimes.

As car-owners-for-now, at least we've learned one good thing: avoid getting hit by a ZipCar. ;-)

Charles

Posted by: Charles at 1:59 EST, February 21, 2007

As someone who has done consulting for Zipcar I can assure you that your impression of them willfully misleading people is acurate. I wish I could be for forthcoming but I wish to still do work for them (since they have a lot of money) but the things I have seen and heard have made a jaded person like myself scratch my head. The VP of Marketing is guy named Matt and he is the man in charge of the missleading wording on their site and postcards. Send him an email at matt@zipcar.com or to the ceo at Scott@zipcar.com

-lende

Kristina from Zipcar just phoned to tell me that (a) Zipcar does not use any consultants, and that (b) this comment was not written by a Zipcar employee in Toronto called Mr Lende. So now you know. – Felix

Posted by: Answerman at 11:08 EST, March 01, 2007

I am confused by the last comment. So Zipcar calls and says they don't use consultants but fail to comment on what this guy said about them.

Big deal they dont use consultants...maybe this guy is trying to hide his ID because it certainly seems like he has some inside information.

I still feel we are owed an explanation.

Mike

Posted by: MIke at 9:11 EST, April 20, 2007

Wow! I should probably have been so much more informed prior to joining zipcar, reading this information. But as a non-car owner (by choice), but still occassionally needing "controlled (by me) transportation", I joined based on other's accounts of the service, and the information provided on the website. I happen to like it and taking into account I can only control my "responsible" driving. I'm not at all taken by the fact that this insurance issue was not more clearly spelled out. We all take our lives in our own hands driving our own vehicles, with or without insurance. It's a great service that offers those who need it, a way to use it. Why do we always have to nitpik? Can't we all just get along?
This post is posted with the greatest amount of respect for those opionions posted. Please don't beat me up for mine.

Posted by: Kimberly at 14:03 EST, May 06, 2007

Why are you so negative about Zipcar? Did you know that 100,000 people use it? Obviously, they can't all be wrong about the company. Morover, you are loosing sight of the fact that their program reduces gas emmissions at a greater rate than any other organization and helps people become more mobile at a reasonalble cost. It is easy to point out faults with anything or anybody, but one question we should all ask ourselves is; "Am I doing as much as Zipcar to improve the enviroment and the lives of a hundred thousand people? What have you done latley?

Posted by: Jude Carlson at 14:58 EST, May 08, 2007

Ya gotta be kidding me. The last two people are either totally out to lunch, or sleeping with a Zipcar employee. People are not slagging Zipcar because they're not 'perfect', or that the idea of sharing cars isn't a great one. The POINT IS that Zipcar has pretty poor insurance coverage - own a house anyone? - and worse, try to hide the fact, including suggesting that they have more insurance than car rental firms (when they clearly don't). They're not being honest folks, and that's the issue.

Posted by: Steve B. at 20:40 EST, May 08, 2007

It looks like Zipcar has finally taken a step in the right direction and updated their insurance coverage web page. See my blog post on the subject.

Posted by: Dave Brook at 18:33 EST, June 12, 2007

The claim that less than 1% of Zipcar users get in accidents exceeding the insurance minimums is really bogus. I mean, the whole point of insurance is to cover you in the rare occurance that something exceptional happens. In all my years of driving (I used to have car for decades) I never got in an accident (knock on wood), should I conclude from that that I don't need car insurance?

Also, the suggestion that it's only an issue if you are at fault or negligible in an accident is bogus too. Who knows what's going to happen out there on the road? The best of us sometimes are absent minded or do dumb things. That's why we have insurance! And even if we are being careful, once insurance comapany lawyers start fighting about it, and you have another driver saying it ws your fault, and no witnesses, you could easily get unduely blamed for something. But that's why we have insurance! Except Zipcar seems to think we should feel fine not being covered by their less than adequate insurance.

Posted by: gg555 at 20:43 EST, September 23, 2007