Carshare, nonprofits face struggles due to insurance blocks

Ithaca Carshare, New York’s only nonprofit, membership-based car sharing service will be pausing operations on May 19, 2023, due to a severe lack of auto insurance for nonprofits in NYS. 

As a result of current New York law, carshares in the State have had to rely on commercial insurance, which for many nonprofits is expensive and unaffordable. As of this year, the two major remaining private insurers of carsharing, Zurich Insurance Group and Philadelphia Insurance, are leaving the New York State market.

NYS insurance regulators prohibit Risk Retention Groups (RRGs) from writing auto insurance in NYS unless they are based here. This problem is unique to New York State, as federal law explicitly allows RRGs located in one state to write automobile insurance in other states.

In 1981, the federal government, through the Liability Risk Retention Act (LRRA), created a way for individual industries to have access to insurance through the establishment of Risk Retention Groups (RRGs). This enabled them to pool their risk across the industry and establish a collective liability insurance plan. Federal law requires RRGs to be licensed in the state they are based in, authorized to engage in the business of insurance under the laws of that state, and follow all regulatory requirements in that state before providing insurance coverage to members of the industry in other states. 

RRGs cannot be held to different standards than requirements of commercial liability insurance companies and cannot be denied participation outright by a non-domicile state. The benefit of RRGs is that it allows the pooling of liability risk and the standardization of assessment and oversight across states. Currently New York State law does not allow for RRGs to provide auto insurance if the RRG is not domiciled within New York. Assemblymember Anna Kelles said this is a law that can be viewed as discriminatory and counter to federal law.

“The federal law states that you can’t discriminate against an RRG and B RGan RRG only needs to meet the licensure requirements and its domiciled state. It doesn’t say that you can require the RRG to be domiciled in your state so that you can have the licensure oversight,” Kelles said.

Despite other insurance groups leaving the state, there is one insurance company, a RRG based in Vermont, who is willing to write auto insurance for Ithaca Carshare. However, they are prohibited by NYS insurance regulators. No other private or commercial insurance company is willing to write their auto insurance.

“[The state] only has this rule around auto insurance and our understanding is that it is ostensibly to protect cab companies.There are hundreds of risk retention groups that are domiciled in states all over the country that write all kinds of insurance in New York, just not auto insurance,” said Liz Field, the director of Ithaca Carshare. While this is a crisis for Ithaca Carshare, it’s also a major roadblock for thousands of other nonprofits across the state who need auto insurance. 

According to the New York Council of Nonprofits (NYCON), many underwriters will not write auto insurance for nonprofits they consider higher risk, such as organizations that transport medically fragile, elderly, or children. This has led to a total market failure for nonprofit auto insurance in NYS. 

“There’s other nonprofits who need a van because they have a youth program or they work with people with disabilities, any number of things,” Kelles said. “The vehicles are often gifted and the nonprofits can’t take it because they can’t get the auto insurance affordably.”

For these reasons, Assemblymember Anna Kelles (D-125) and Senators Lea Webb (D-52) and Samra Brouk (D-55), have introduced bill A.05718 / S.05959 that will allow nonprofit Risk Retention Groups to register in New York and provide automobile insurance to 501(c)(3) nonprofit organizations across the state.

“We’ve had legislators tell us ‘we support the issue,’ but they need to hear from the Department of Financial Services (DFS), they are the insurance regulators of the state,” Field said. “When we hear that we just kind of groan because DFS does not support allowing risk retention groups to write auto insurance, and we don’t really understand why. We’ve heard some concerns from them, but we don’t think they’re very substantive.”

Ithaca Carshare has a large grant from New York State Energy Research and Development Authority (NYSERDA) to participate in electric vehicle programs and they have been unable to start their work with the city to create electric vehicle charging infrastructure. They are currently unable to expand their low income program, also due to a lack of auto insurance. 

Kelles and Fields both emphasized how important carshares are, not only for the local community, but in each community that has them across the state. They also said they are worried about the nonprofits that will be affected by this issue.

state. 

“This bill represents an opportunity to provide essential services to underserved communities, promote sustainability and reduce the financial burden on non-profit organizations. Our legislation explicitly allows risk retention groups which insure 501(c)(3) nonprofit organizations exclusively and meet NYS insurance standards, to be registered in and offer insurance coverage in New York State,” Senator Lea Webb said. “The amendment will align NYS with federal law and allow RRGs based in other states to offer automobile insurance coverage in New York. This change will lower costs and ultimately benefit consumers, especially underserved communities.”

For more information on carshares and auto insurance visit ithacacarshare.org/insurance-updates/ or ithacacarshare.org/nonprofit-carshare-insurance-faqs/, 

“The History of Insurance for Nonprofit Carsharing in New York”, 

“Responses to DFS’ Concerns to A.5718 / S.5959”, and ithacacarshare.org/why-carshare/

Kelles urged people interested in learning more about the bill to visit this website: https://nyassembly.gov/leg/?default_fld=&leg_video=&bn=A05718&term=&Summary=Y&Memo

=Y&Text=Y 

and https://www.nysenate.gov/legislation/bills/2023/s5959

“The opportunity exists to significantly expand carshare services at no cost to taxpayers and as part of the State’s efforts to equitably tackle climate change and make electric vehicles accessible to all New Yorkers,” Kelles said. “Given all the environmental, equity-building, and public as well as private benefits of carsharing, New Yorkers should be doing everything we can to ensure carshares flourish and give New Yorkers real choice in their transportation options.”