An Orange County insurance company, stung by heavy losses in its vehicle liability division, is canceling coverage of taxi companies in three Eastern states, potentially idling hundreds of cabs and thousands of drivers.
Balboa Insurance Group, a subsidiary of giant Avco Financial Services, headquartered in Irvine, insures taxi fleets in Pennsylvania, New Jersey and Delaware. However, company officials decided at least six months ago to get out of the taxi insurance business and have already told Philadelphia cab companies that Balboa will not renew their policies past the end of the year, Pennsylvania state officials said.
Although a Balboa executive refused to comment on the reports, Alan Kohler, an attorney for the Pennsylvania Public Utility Commission, said his agency has known for six months that the company planned to quit insuring taxis. "It's a real problem," Kohler said.
Balboa wrote $161.3 million of insurance policies during 1985, including $48.6 million in automobile liability coverage, said John Unsinn, a supervising examiner with the California Insurance Commission.
Balboa's loss ratio in the auto liability line, which includes taxi coverage, was about 85.9% last year, meaning that the company paid out nearly 86 cents in claim settlements for every dollar that it earned in auto liability premiums, Unsinn said. "That's pretty bad," he added.
For all of 1985, Balboa posted a net underwriting loss of about $31 million. However, investment income of about $25.9 million lowered the company's net loss to about $5 million. At year-end, Balboa's assets totaled $230 million and the company had a surplus of $79 million.
The company had planned to cancel its policy with Yellow Cab, Philadelphia's largest taxi operator, on Aug. 1. But the move, which would have idled 600 cabs--about 50% of the city's fleet--and caused the loss of about 1,000 jobs was thwarted when Yellow Cab's operators filed for bankruptcy and won a court order forcing Balboa to maintain coverage until Oct. 1.
Taxi companies in Pennsylvania cannot legally operate without insurance.
Metro Transportation Co., which operates Yellow Cab in Philadelphia, is now seeking a self-insurance program, Kohler said. Although winning approval of such a plan will take time, Metro believes that self-insurance is its "only option," he said.
Although offering commercial auto liability coverage has always been risky, taxi liability insurance is an especially bad line for insurers, said Tim Dove, a spokesman for the San Francisco office of the Insurance Information Institute.
"One of the problems with the cab companies . . . is how much quality control the owners have," Dove said, noting that many small cab companies fail to check driving records of prospective employees. "Many of these guys are very bad drivers and are too aggressive."