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☂️ NYC TLC Drivers Scramble To Find Comp & Collision Insurance For Teslas
Many insurers are nervous to underwrite physical damage insurance for NYC TLC-plated Teslas (& other expensive EVs). For Model 3 (maybe Y), Chicago-based Transit General appears willing
With the reinstatement of the EV exemption to the FHV License Pause (a/k/a TLC Plate Cap), many NYC for-hire drivers are rushing to buy electric vehicles (EVs) (Note: the vehicle must be FULLY electric-powered, not hybrid).
Just like many other people, TLC-licensed drivers usually finance the majority of their vehicle purchase, agreeing to 5 to 6 year auto loans with 8-10%+ interest rates now 👀. Versus the zero interest rate world with low inflation that existed a few years ago, many might (incorrectly) label today’s financing terms as “predatory”. Obviously, to any person with a basic understanding of finance and markets, the interest rate and inflation dynamic has significantly changed.
This is what annoys us about regulators like NYC Taxi & Limousine Commission Chair David Do and non-financial journalists like Evan Simko-Bednarski, who works for Alden Global-owned Daily News. They misuse the word “predatory” because it gets cheers & clicks. They are not business people, do not understand the economy or markets 📈 and refuse or are willfully blind to the facts and math 🖩. We’ve done the analysis.
Undoubtedly, as is the case in almost every industry, there are bad actors. Those bad actors should be called out…after presenting evidence and charging them with the relevant financial crimes they are being accused of repeatedly & publicly. We go on this mini-rant because it provides context for the main subject of today’s article - comprehensive & collision coverage for TLC-plated EVs, specifically Teslas.
Getting back to the story.
Unlike the average person who’s buying a vehicle today, most TLC drivers DO NOT purchase “full coverage” insurance (i.e., liability + physical damage insurance combined) for their vehicles, although their ⚠️ lenders actually require them to ⚠️.
So, how do they get away with it?
This is how it generally works.
A TLC-licensed driver will go to a dealership and portray that they are buying an EV for personal purposes and present “regular” DMV insurance documents (i.e., State Farm, Progressive, GEICO, Allstate, Liberty Mutual, USAA, Farmers).
If they pass the credit check, they’ll be approved for a loan and have access to the applicable warranties (i.e., battery) that come with the purchase. You must remember, a warranty is effectively a type of insurance built into a vehicle’s price. The dealer and lender sees the standard policy and are generally satisfied ✅. The TLC-licensed driver, drives off the lot with their new car (or picks it up later) plated with non-commercial New York State DMV Plates.
Most dealers, lenders and auto manufacturers suspect nothing…it seems like a standard non-commercial vehicle sale.
After this, almost immediately, the TLC-licensed driver goes to their NYC TLC insurance broker pays the deposit for the required NYC FHV liability-only insurance, hands in their “regular” DMV plates and cancels their “regular” DMV insurance (i.e., State Farm, Progressive, GEICO, Allstate, USAA, Farmers). They THEN apply for commercial NYC TLC Plates.
Most dealerships and lenders do not check again on whether the appropriate full coverage insurance is being maintained. In order to save money, many (NOT ALL) TLC-licensed drivers start their financial relationship with their new auto lender by breaking their financial contract, hoping they won’t get caught.
Furthermore, when those TLC-licensed drivers return to a dealership for warranty work, many service departments see the commercial plates and say, correctly, that the warranty is voided. We know this, because we’ve spoken to many dealerships about this. We’ve even spoken with Tesla about this several times over the past several years. They often give an unclear answer on whether the warranties will be voided if the vehicle is TLC-plated (Pro Tip: unclear dealership answer = 80%+ chance your warranty will be voided).
[Most] Insurance Companies Aren’t Naïve
The largest NYC for-hire transportation insurance companies, continue to be, understandably, nervous about providing comprehensive & collision insurance coverage (a/k/a physical damage) to TLC-plated Teslas and other electric vehicles (EVs). As we’ve covered, a $2,000 fender bender that occurs with a gas or hybrid vehicle, can result in huge costs (i.e., insurance claims and out-of-pocket liability) if it happens when an EV is involved.
Again, this is why it’s so important to have at least a basic understanding of business and finance. This is really really hard insurance risk, right now. I know many traditional TLC insurers are rushing to create affordable EV-centric comp & collision products, it’s really hard though with EVs.
If insurers have chosen NOT to underwrite Teslas (or other EVs), it’s NOT conspiracy, it’s likely based on their experience with actual claims.
What Is “Comp & Collision” Insurance?
Without fully restating a previous article published in September 2021, “comprehensive & collision” insurance refers to additional vehicle insurance protection beyond required auto liability insurance coverage.
As we stated above, although most non-commercial drivers have collision insurance, many NYC TLC drivers just keep liability-only insurance policies. It also doesn’t help that comprehensive & collision insurance is prohibitively expensive for NYC TLC drivers due to the nature of the insurance risk (e.g., NYC for-hire vehicle driving 8 to 12 hours per day is TOUGH 😓 insurance to underwrite).
☂️🚕 NYC TLC Insurance: 2023 Market Overview
Based on our discussions with NYC TLC insurance brokers, the major collision insurance providers in the NYC TLC market - Kingstone, American Transit, Hereford and Adriatic - are either NOT underwriting Teslas any longer or are extremely hesitant.
**To be clear though, most insurers seem to be underwriting comp & collision for non-Tesla EVs, that cost below $65,000.**
However, knowing how insurers think, as other non-Tesla brand EVs become more popular, they might reconsider underwriting policies if their claims experience is similar to their experience with Teslas. For example, the lack of third party EV service infrastructure and parts might be making it difficult to reasonably service insurance claims related to EVs or causing claim turnaround times to be unusually long, resulting in higher than normal payouts. In fact, Tesla might have an advantage over other EV manufacturers, so the claims experience for non-Tesla EVs could be worse!
The regulator (TLC), drivers and other industry participants need to understand that this is quite technical and based on actuarial math.
Transit General
However, there is bit of good news 🥳 for TLC drivers who are genuinely trying to get full coverage for their new EVs, specifically Teslas. Although other companies manufacture EVs, Tesla still has a unusually dominant share for several reasons, from being an EV-only first mover to the ability to access its fast-charging network (“Superchargers”).
The data speaks for itself.
EV Make & Model: AutoMarketplace Analysis to August 26th from the *latest* 1,000 new EV-only plate release
Top 5 EV Models to August 26th from the *latest* 1,000 new EV-only plate release:
Tesla Model Y: 339
Tesla Model 3: 172
Kia Niro: 55
Toyota bZ4X: 46
Hyundai Kona: 41
After checking with multiple sources, Chicago-based Transit General, is willing to underwrite TLC-plated Tesla Model 3s and potentially certain Tesla Model Ys (Note: they could decide to exit market in future or change underwriting terms).
It’s not yet listed on Transit General’s website, but they are working with a handful of NYC-based TLC insurance brokers and may soon expand their distribution. We also know of and have spoken with many large TLC insurance companies that are actively trying to create a comp & collision products for Teslas (& other more expensive EVs) and we’ll keep our readers up to date on that.
Below, we share a screenshot sent to us (personal details blacked out for privacy) of a recent NYC FHV commercial comp & collision insurance policy for a 2023 TLC-plated Tesla Model 3. This policy was underwritten only two days ago. Another point worth mentioning is if you buy your EV in an LLC or business entity, this policy might not be available to you. Insurers may only want to underwrite individuals at this time, but this is a dynamic and active marketplace, so that status quo is also subject to change.
Remember there is also a depreciation schedule, so you need to do the math such that your loan is never more than the covered amount of policy (i.e., you can’t have coverage for $29,000, but a $34,000 auto loan). Using the depreciation schedule below, next year the $38,990 Tesla Model 3 will be valued at $29,243, but what do you think the loan balance will be or the cost to fix a major accident? Two years from now it will be valued at $24,173, but what will the loan balance be or the cost to fix it? Three years from now it will be valued at $19,495, etc., etc.
“Predatory”
Firstly, very simple math shows us the following for Year 1.
$40,000 EV (5 year loan at 10%)
~$850 per month
TLC Liability Insurance = $4,000 per year (individual policy)
~$350 per month (including fees)
Will likely increase yearly 📈
Note: business entity policies are typically ~$500 per month
TLC Comp & Collision = $2,800 per year
~$230 per month
Will decline yearly 📉
Note: $1,000 out-of-pocket deductible in case of at-fault or undetermined fault incident
DMV & TLC Fees = ~$870 per year
DMV registration = $450 annually
TLC renewal = $625 biennially
3 NYS Inspection = ~$110 per year
~$72 per month
Maintenance Allowance = $4,000 per year
~$330 per month
Let’s help the regulator and journalists do the math.
~$850 + $350 + $230 + $72 + $330 = ~$1,832 per month
($1,832 per month * 12 months) / 52 weeks = ~$423 per week
Also, these cash flows are not even. Sometimes a driver can’t pay a one-off $2,000 repair bill (“working capital”).
Most “predatory” leasing companies don’t own gas stations, so energy savings is not appropriate in this like-for-like comparison.
We encourage drivers ⚠️ NOT ⚠️ to break their financial contracts with their lenders. However bad you think local leasing companies are, and some definitely are, don’t get us wrong, “predatory” lenders will repossess your car. They are often not based locally, are generally pretty no-nonsense and not that flexible.
If you buy an EV please 🙏 get comp & collision insurance, do not game this system. There is a high probability it won’t end well because you’re dealing with large national financial institutions. Do not listen to people who are not qualified to give any sort of advice on this subject and/or have perverse incentives.
That being said, WE are NOT licensed financial advisors, but hope the above logic and analysis is helpful to you. Call us out if you think we made any mistakes or disagree.
As always, let us know your thoughts in the comments section below or by emailing us at info@automarketplace.com.
AutoMarketplace NYC covers the for-hire transportation industry and automotive news. Check out AutoMarketplace on YouTube ▶️
Imagine paying all that money for a Tesla, getting deactivated by Uber (which will be easier after drivers flood market), then getting into an accident with no collision insurance. 😬
Tlc is the worst city agency and they hired all the losers to screw the legal system