A Zipcar That Poor People Can Afford
Car shares are often too expensive for lower-income people, so a nonprofit in Buffalo, N.Y., started its own. But insurance problems might spell the end of it.
A car-sharing network for people who can't afford a car sounds like a smart idea, but one such program in Buffalo, N.Y., -- despite successfully attracting and maintaining members -- has encountered an unexpected obstacle that now threatens to shut it down entirely.
In 2008, Michael Galligano, a community organizer in western New York, was looking at ride service companies opening networks in cities across the country. Cities like these networks, of course, because they help reduce traffic congestion and exhaust pollution. And companies like Zipcar and Car2Go can be great for urbanites who down own their own vehicles. But their per-hour charges add up quickly, and they may not be available in some neighborhoods where lower-income residents live. Galligano saw that poor people didn’t tend to take part and often remained isolated in their neighborhoods or stuck paying exorbitant cab fares.
So Galligano helped create a nonprofit called Buffalo CarShare. At an average cost of $100 per month for membership and usage, it’s a relatively affordable way to rent a short-term ride. According to Galligano, half of the 900 Buffalo CarShare members earn less than $25,000 a year (though the company also has plenty of higher earners).
Operated out of a storefront and promoted at neighborhood meetings and church functions, the company has had such notable results -- creating a business model (not a charity) that successfully attracts people who don't have a lot of money to spend -- that the state government wanted to spread it to other cities upstate. The Department of Transportation and the state Energy and Research Development Authority awarded Buffalo CarShare $280,000 to replicate its model in other cities.
But even as the state seeks to expand Buffalo CarShare, state regulations threaten to shutter the group. The issue? Auto insurance. On June 15, Buffalo CarShare’s insurance policy expires and the company is expected to close without last-minute intervention.
New York’s insurance regulations are particularly onerous for insurers: State law sticks carriers with medical expenses incurred in accidents caused by other drivers. In other words, if you’re driving and someone hits your car, causing you injury, it’s your insurance that has to pick up your medical bills.
It’s easy to see why that would make it hard for small car-sharing companies to attract an insurer. And Galligano said the law is the reason behind Philadelphia Insurance Company’s decision to discontinue coverage for Buffalo CarShare. The company declined to comment. But Galligano noted that earlier this year a vehicle hit a Buffalo CarShare car, injuring the driver and triggering a significant pay out.
“Philadelphia ventured into this market to see if they could make a profit. They were the only company that offered to insure us, and they made money the first couple of years,” Galligano said. “Now they don’t want to deal with New York state anymore, and I don’t blame them. It’s too risky.”
New York fleet insurance has long been criticized for pricing out small businesses. Insurance companies blame the state’s no-fault law, which requires them to cover up to $50,000 in medical expenses incurred in an accident regardless of who is to blame; and the vicarious liability provisions, which allow drivers of rental cars to sue both that company’s carrier and the insurance company of other drivers involved in a crash.
Those provisions have driven out many small car-rental companies in the state. And they don’t bode well for the few small car-sharing organizations that, like Buffalo, make community inclusion their mission.
“There are independent nonprofit car shares all over the country,” said Jennifer Dotson, executive director of Ithaca (N.Y.) Carshare. “There is one in Burlington, Vt., right over the border. They can shop for insurance as much as they want.” But for groups in New York, the carrier options are limited because of the state’s insurance law. “We spent our first two years just looking for insurance.”
Car-sharing first gained traction in the U.S. about 15 years ago. Since then, small independent car-share companies have mostly been gobbled up by larger companies like Zipcar (which itself was bought by rental-car giant Avis in 2013). BMW has gotten into the game with its Drive Now service. These conglomerates, which manage thousands of cars, self-insure.
The bigger playing field has brought car-sharing into many new markets and, presumably, taken a significant number of cars off the road. That’s a good thing, said Sharon Feigon, executive director of the Shared-Use Mobility Center, a new organization that analyzes sharing systems. But there’s no guarantee that a large corporation will embrace the needs of a particular community.
“Let’s say someone bigger buys Buffalo CarShare,” said Feigon. “Do they want to put the time and effort into serving the market the people in Buffalo are serving?”
With the June 15 deadline looming, and New York’s legislative session winding down, there are still a few ways in which Buffalo CarShare might be kept alive.
There are at least two bills before the legislature that seek to address car-sharing. One proposal would create a system to provide insurance for those car-sharing services that, like Uber, are available by phone app. Another would do the same for individuals who rent their own vehicle to others.
Galligano said he has also had preliminary conversations with Zipcar, which has an outlet at the University at Buffalo. Galligano said the company had contacted him, though Zipcar said only that it was open to expanding opportunities in Buffalo.
Being taken over by Zipcar would be a relief, said Galligano, as well as a strange conclusion.
“It is really odd that I am begging a multimillion dollar company to support a $200,000 nonprofit that supports poor people,” he said. “It shouldn’t be this way. The entire law should be made so that poor people can get around and our company can maintain itself.”
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