Whether it has been the byproduct of hasty or politically-motivated decisions made by regulators and/or legislators, the drivers in our industry have dealt with a mind-boggling amount of unnecessary turmoil for literally decades. The inaction of those same people, who are supposed to protect the public from harm, has also been a serious problem, at times, but the current insurance crisis is a whole other level of either corruption or cowardice – in this instance by the New York State Department of Financial Services (DFS), the agency responsible for regulating the insurance industry, among other things.
As you probably know, regulators were aware that the American Transit Insurance Company (ATIC) – which provides auto insurance for a majority of the drivers regulated by the New York City Taxi & Limousine Commission (TLC) – was insolvent by $6 million all the way back in 1986… and that downward spiral never improved. Now, they’re more than $700 million in the hole, and regulators and legislators alike are scrambling to find a path forward before tens of thousands of drivers face catastrophic insurance rate hikes and are driven out of the industry.
A likely “solution” to the problem, according to Matthew W. Daus, Esq., a former TLC Chair (among other things), will be a bail out – which is essentially an admission by regulators and legislators that they screwed up, and now they’re going to spread the pain around so (hopefully) no one person or company gets hurt “too badly.”
“New York City’s taxi and [app-hail] insurance system is in a state of crisis, and the consequences are about to reverberate far beyond the five boroughs,” says Daus, who is also Transportation Technology Chair of the City College of New York’s University Transportation Research Center (www.utrc2.org). “The recent insolvency of ATIC has exposed deep cracks in the state’s insurance framework. It’s not just a problem for the drivers who depend on affordable insurance to make a living – it’s a systemic failure that could leave homeowners in Buffalo and car owners in Rochester footing the bill for Albany’s regulatory failures. The company’s struggles highlight a vicious cycle: the high cost of insuring for-hire vehicles, driven by fraudulent claims and inflated medical bills, forces insurers to hike premiums. This, in turn, squeezes drivers, many of whom are immigrants and low-income workers.”
AutoMarketplace recently reported that insurance rates for most TLC-regulated drivers will likely increase between 2% and 10% in 2025. Will this be the “breaking point” that forces some of those drivers out of the industry? Probably.
“Given the size of American Transit’s market share, the ongoing taxi medallion crisis, and the rise of driver ‘lockouts,’ an excessively large increase could overwhelm the industry,” noted AutoMarketplace. “Drivers and fleets, accustomed to prevailing rates – albeit actuarially unsustainable – have built their livelihoods and businesses based on certain assumptions about the ongoing cost of insurance. Many simply won’t be able to absorb that cost without taking a significant pay cut or losing profits.”
So, what can be done to repair the industry and reduce the impact on individual drivers? Daus outlined the following reforms to reduce costs and restore fairness to the system in an op-ed that ran in amNY.
- Lowering PIP Coverage for NYC TLC Drivers: Adjusting mandated coverage levels would significantly reduce costs for drivers without sacrificing essential protections.
- Attracting New Market Players: Encouraging more insurers to enter the market would foster competition, helping to drive down premiums and build a more resilient insurance system.
- Enacting Legal Reforms: Addressing fraud and abuse in the legal system is critical. New York should implement measures to curb fraudulent lawsuits, including capping non-economic damages and increasing oversight of the professionals involved in no-fault claims.
In a conversation that we had over the phone in February, he offered some additional ideas for fixing NYC’s broken insurance market.
“Telematics devices can be helpful. Calculating premiums based on how often you use the vehicle and tying rates to real-time data that’s collected from them could lower rates for a lot of drivers,” Daus said. “A lot of drivers already have dashcams with those functions. They help reduce fraudulent claims, so I think the TLC or New York’s City Council should mandate cameras for all TLC-licensed vehicles.”
According to Daus, TLC vehicles are safer than ever, but insurance rates are higher than ever.
“Crashes involving a TLC licensed driver declined by more than one-third from 2015 to 2024,” he explained. “TLC-licensed drivers tend to be among the safest on our streets because they are professionals who cannot obtain or keep their license unless they meet and maintain TLC’s strict standards.”
Another option that Daus thinks would make life easier for TLC-regulated drivers would be allowing the industry’s rental fleets to take on more TLC permits – buying the cars and paying for their insurance and maintenance, rather than having individual drivers shoulder those responsibilities.
“The rental companies could take over the plates of people who would otherwise be leaving the industry,” Daus explained. “Rather than turning your plate over to the TLC, you could transfer it to a leasing company and lease from them.”
During testimony that he provided to New York City Council’s Committee on Transportation and Infrastructure in February, Daus pointed out that the industry’s drivers have more protections and benefits than ever before, from organizations like The New York Black Car Fund and the Livery Fund, making PIP beyond state minimums unnecessary. A report on the topic is forthcoming from New York’s University Transportation Research Center, andCity Council is waiting to analyze it to determine the outcome of a no-fault bill they recently introduced.
“Drivers are not allowed to recover money from any no-fault claim until after first filing a workers’ compensation claim for these same types of expenses,” he pointed out in his testimony. “Taxi medallion owners are required to provide workers’ compensation insurance to all taxicab drivers. The New York Black Car Fund provides extensive benefits for most for-hire vehicle drivers, and the New York Livery Fund provides limited coverage as well. Those drivers who are severely injured must exhaust Livery Fund coverage before tapping into the PIP.”
Daus estimates that if nothing is done to fix the current insurance crisis, the industry will essentially implode within two to three years.
“The failure to act will compound the crisis and lead to many thousands of drivers becoming unemployed, transportation companies losing revenue, and passengers paying higher fares and suffering from significantly reduced service,” he said. “I started my career as a plaintiff’s tort lawyer, so I am familiar with how claims, insurance coverage, and the system work – and how the system has failed.”
