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.

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31 Responses to Zipcar insurance, part 2

  1. Doc Barnett says:

    “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.

  2. Charles says:

    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

  3. Answerman says:

    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

  4. MIke says:

    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

  5. Kimberly says:

    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.

  6. Jude Carlson says:

    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?

  7. Steve B. says:

    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.

  8. Dave Brook says:

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

  9. gg555 says:

    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.

  10. joe says:

    Yea it has reached a tipping point – I am a 4 year member that is hanging it up this year – it is cheaper now that insurance has come down and cars are cheaper than ever – we bought a used subaru and it will cost us half the price that zipcar cost us in the last 3 years… there goes their “model” – it’s mostly college kids using the cars and they do all the things they are not supposed like smoking and cat hair all over the car or the trash they leave behind and NOW MORE THAN EVER I get into a car to find it on “E” – then I fill it up and the next time I use the same car it’s empty again – thanks for the fun zipcar but our time has come to say goodbye…

  11. joe says:

    Yea it has reached a tipping point – I am a 4 year member that is hanging it up this year – it is cheaper now that insurance has come down and cars are cheaper than ever – we bought a used subaru and it will cost us half the price that zipcar cost us in the last 3 years… there goes their “model” – it’s mostly college kids using the cars and they do all the things they are not supposed like smoking and cat hair all over the car or the trash they leave behind and NOW MORE THAN EVER I get into a car to find it on “E” – then I fill it up and the next time I use the same car it’s empty again – thanks for the fun zipcar but our time has come to say goodbye…

  12. joe says:

    Yea it has reached a tipping point – I am a 4 year member that is hanging it up this year – it is cheaper now that insurance has come down and cars are cheaper than ever – we bought a used subaru and it will cost us half the price that zipcar cost us in the last 3 years… there goes their “model” – it’s mostly college kids using the cars and they do all the things they are not supposed like smoking and cat hair all over the car or the trash they leave behind and NOW MORE THAN EVER I get into a car to find it on “E” – then I fill it up and the next time I use the same car it’s empty again – thanks for the fun zipcar but our time has come to say goodbye…

  13. joe says:

    Yea it has reached a tipping point – I am a 4 year member that is hanging it up this year – it is cheaper now that insurance has come down and cars are cheaper than ever – we bought a used subaru and it will cost us half the price that zipcar cost us in the last 3 years… there goes their “model” – it’s mostly college kids using the cars and they do all the things they are not supposed like smoking and cat hair all over the car or the trash they leave behind and NOW MORE THAN EVER I get into a car to find it on “E” – then I fill it up and the next time I use the same car it’s empty again – thanks for the fun zipcar but our time has come to say goodbye…

  14. joe says:

    Yea it has reached a tipping point – I am a 4 year member that is hanging it up this year – it is cheaper now that insurance has come down and cars are cheaper than ever – we bought a used subaru and it will cost us half the price that zipcar cost us in the last 3 years… there goes their “model” – it’s mostly college kids using the cars and they do all the things they are not supposed like smoking and cat hair all over the car or the trash they leave behind and NOW MORE THAN EVER I get into a car to find it on “E” – then I fill it up and the next time I use the same car it’s empty again – thanks for the fun zipcar but our time has come to say goodbye…

  15. Dulcinea says:

    Very interesting article … said the relatively new zipcar member. I very much want to postpone buying a car and access to a zipcar is a huge factor in allowing me to do that. I use the car once a week to run all my errands (ever try grocery shopping without a car in a city with no convenient corner stores?) and I have to say that paying $300/year would NOT be a deterrent for me. I think I would still come out far ahead of paying for my own car so I don’t see that as a problem. I do wish that I had realized this sooner, though. I will have to look into purchasing liability and underinsured motorist insurance … I do wish that there were links on the zipcar website, though. Part of the hassle of having a car is having to deal with this kind of thing. Good to know that it’s a issue, though, thanks for the article!

  16. Dulcinea says:

    Very interesting article … said the relatively new zipcar member. I very much want to postpone buying a car and access to a zipcar is a huge factor in allowing me to do that. I use the car once a week to run all my errands (ever try grocery shopping without a car in a city with no convenient corner stores?) and I have to say that paying $300/year would NOT be a deterrent for me. I think I would still come out far ahead of paying for my own car so I don’t see that as a problem. I do wish that I had realized this sooner, though. I will have to look into purchasing liability and underinsured motorist insurance … I do wish that there were links on the zipcar website, though. Part of the hassle of having a car is having to deal with this kind of thing. Good to know that it’s a issue, though, thanks for the article!

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  20. Zip This says:

    They tried to blame me for damages I reported before I drove off on my reservation!They said I called 8 minutes too late. They suck for sure… And they like to drop reservations at the last minute and offer a substitute on the other side of town… I often find the cars dirty, or smoked in, no gas, dents….people do not report damages, or clean em and maybe that is because they fear taking the rap.

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