Soaring insurance premiums put brakes on sedan services

August 10, 2005|By Rhasheema A. Sweeting | Rhasheema A. Sweeting,SUN STAFF

Sue Starr depends on Towson Sedan Inc. regularly to get to and from the hairdresser and her doctor appointments. The 93-year-old woman prefers the sedans to taxis because, she said, the drivers go the extra mile to ensure her safety.

"They will walk me from the curb to my front door," she said, adding that she and the sedan operators often exchange little gifts such as cookies and candy. "We have a nice relationship, and I feel very close to them," she said.

But the door-to-door service and courteous drivers she enjoys might be in jeopardy. Nearly 20 sedan companies, including Towson Sedan, say they are at risk of being driven out of business by insurance rate increases.

As a result of premiums that have risen more than 50 percent in recent months, about 70 of the 460 sedan service vehicles have been pulled off the road. Some operators have closed, and others say they will be forced to close during the next year.

The impact falls most heavily on city residents without other means of transportation. Many of them began relying on sedans during the past decade or so as mass transit service was cut back and taxi companies curtailed service in neighborhoods they considered unsafe.

"In two more months, all of my cars will be gone," said Naji Hassine of Naj Transportation, which is down to 16 cars from 20 when he began three years ago.

The Maryland Automobile Insurance Fund, the quasi-governmental agency that insures high-risk drivers, including most sedan operators, said the recent rate increase followed seven years without one and more accurately reflects the accident history of the industry.

MAIF, which provides coverage of last resort to drivers who have been denied coverage by two or more insurance agents, raised the average rates for sedan services by nearly 53 percent last year because sedans are two or three times more likely to be involved in accidents, said Kent Krabbe, executive director of the fund.

"We were willing to absorb our losses because sedan policies represent only 1 percent of the business," said Krabbe, whose agency has about 115,000 policies.

The fund, which periodically evaluates rates for all lines of insurance coverage, raised the statewide average rate for private auto insurance by about 9 percent last year.

It raised premiums for sedans markedly last fall after it determined that it was paying out $2 for every $1 collected from the sedan companies, Krabbe said.

"We're trying to keep rates within reason, and we're still losing money," Krabbe said. "We recognize that the sedans fulfill some sort of public service in the community, but we can only absorb our losses for so long."

The Maryland Insurance Administration, which regulates insurance companies, has scheduled a hearing for next month to evaluate the situation. It could ask MAIF to scale back the increases.

"The rates are going to rapidly put us all under," said Connie Galiani of Towson Sedan, which has doubled its prices during the past two years and suffered a decline in business. A majority of its business comes from senior citizens on fixed incomes.

Sedan operators are registered by the state like taxis but aren't metered. They charge a flat rate and aren't restricted to a particular service area. They also differ from taxi companies in that passengers often schedule service well in advance for needs such as medical appointments and trips to work.

"It's like an intricate part of the city's public transportation that seems like it's falling apart," Derrick Jessup, head organizer in the city for the Association of Community Organizations for Reform Now, a civic group known as ACORN.

"When there's no buses, taxis, light rail or subway, there's those faithful sedan drivers that are always on the road."

Chalisa Moore, 26, uses South Side Sedan service five days a week to get from her Lakeland home in Southwest Baltimore and her job at a crane rental company in Highlandtown.

"It's a good service because I don't care for the bus and metered cabs cost more than sedans," she said, adding that the price of the sedan round trip jumped recently to $20 from $15. If it continues to get more expensive, she might reluctantly take the bus or try to get a car, she said.

Sedan drivers say the free market isn't fully at play because raising their prices to cover rising insurance premiums means they increasingly lose passengers to unlicensed and illegal "hacks," private drivers who pick up for cash people who they see waiting by the curb.

"I saw an elderly lady ripped off of $200 worth of groceries by an illegal hack who lied about taking her home," said Harry Pollay, president of the Sedan Transportation Association of Maryland, which represents sedan businesses.

"This is what happens when the existing entity doesn't have to be accountable," he said, referring to MAIF.

Steve Lehman, who opened South Side Transportation to serve the Brooklyn area of South Baltimore about eight years ago, recently merged his business with another sedan operator to trim overhead costs. His business cannot continue with insurance bills eating up half of his profit, he said.

"Once we're gone," he said, "there's not going to be anyone legitimate to do it."

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