Ticket to Ride 

Small transit businesses squeezed by rising insurance rates

Ben Sagenkahn's insurance rates have increased 175 percent in the past three years. Alex Malone's have jumped by 260 percent.

The two are among many transit-company owners being squeezed by enormous hikes in insurance rates for commercial passenger vehicles. Some say if the rates don't stop growing, they may go out of business. They blame a combination of factors, from rising medical costs to Colorado's insurance laws.

Sagenkahn owns Peak Transit, which offers door-to-door sedan service and a shuttle service between Colorado Springs and Denver International Airport. Three years ago, Sagenkahn paid $2,000 in annual insurance on each of his five vehicles. Today, he pays $5,500 for each of his vehicles, which now total eight.

"I don't know what to do," Sagenkahn said. "If it continues, I'm going to get out [of the business]."

Malone, the co-owner of Monument Limousine, says his insurance has increased from about $1,500 annually per vehicle three years ago, to more than $5,000 currently.

"The cost is ridiculous," Malone said.

Auto-insurance rates have increased for just about all Colorado consumers in recent years. According to the insurance industry, a major factor is Colorado's "no-fault" insurance law. Under the no-fault system, used in 13 states, a driver must carry high personal injury protection coverage, which pays for the driver's medical expenses that result from an accident, regardless of who's at fault. The law also limits the right to sue other motorists for damages. The idea is to prevent the hassle and cost of lawsuits, and to protect taxpayers against having to pay unfunded medical claims. However, critics say the high medical-coverage requirement has driven up costs.

The no-fault laws affect transit companies disproportionately due to the large liability exposure, Sagenkahn says. "If a drunk driver hits a bus, everyone on that bus is going to go to the doctor."

Larger transit businesses -- those with at least 25 vehicles -- can avoid the problem by opting for self-insurance, in which a company pays claims out-of-pocket. But smaller businesses can't.

Other factors add to the problem. The rising costs of medical care have led to higher auto-insurance payouts, says Sagenkahn's insurance broker, Jack Sandstrom. As a result, the commercial-insurance business has become unprofitable for a number of companies, leading many to withdraw from it. With less competition, the companies that are left are able to charge higher rates. And the recent decline in the stock market has depleted the capital reserves of insurance companies, which is also causing them to increase rates, Sandstrom says.

If the increases continue, small transit providers may ultimately be driven out of business, leaving larger operations with near-monopolies, Sagenkahn fears.

For now, Sagenkahn is about to increase the fare for his DIA shuttle service, from $30 to $35, to help make up for the insurance-rate hikes. Malone says he's had to increase his price for sedan service to DIA, from $85 two years ago, to $138 today.

"It hurts business quite a bit," Malone said.

-- Terje Langeland


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