(MARRS-RX7) FW: Car Insurance May Not Cover You at the Track

Gervais, Al AGervais
Tue Oct 21 18:13:16 CEST 2008


 

Interesting.  Not sure of the source of this story, it arrived as an
E-mail..  But apparently the old FATT party line of "You're insurance
will cover you because this is a driving school" may no longer be true.
-AG

 


Car Insurance May Not Cover You at the Track 


 

Shelby American Automobile Club

CHECK THE POLICY Some insurers no longer cover drivers who participate
in track events like these in Utah, above, and Virginia. 

By ROY FURCHGOTT

Published: October 17, 2008 

IT'S no secret that insurance companies don't like the people they cover
to drive fast. So it shouldn't be a surprise that the industry has been
removing a policy loophole that insured drivers on racetracks.

That has left weekend warriors uninsured if they participate in track
days or attend high-performance driving schools. Jerry Kunzman,
executive director of the National Auto Sport Association, said that
participation at its track events had jumped fivefold since 2003 and
that many of those drivers had no idea they were not covered..

"Maybe 25 or 30 percent have done the research, the middle third just
assumes they are covered, and the top third just don't have a clue," he
said.

What's happened is that many insurers have redefined the term "racing."
Policies have long had exclusions for racing, but it was defined as a
"timed event."

High-performance driver education neatly avoided that definition.
Although cars may take laps at top speed, they aren't timed.

At many schools, including those held by the Porsche Club of America and
the BMW
<http://topics.nytimes.com/top/news/business/companies/bayerische_motore
n_werke_ag/index.html?inline=nyt-org>  Car Club of America, students are
required to attend classroom sessions. On the track, drivers get
one-on-one tutoring from an instructor under controlled conditions. The
cars are generally sent around the track in small groups with passing
limited to straightaways - and only when the driver being passed signals
that doing so is all right. So because these runs were not timed, many
drivers were covered by their normal automobile policies. 

That loophole did not escape the attention of insurers - some clubs
practically taunted them in their newsletters. "There was a period of
time when clubs were openly flouting this. 'Take driver's education and
your insurance will cover you. Drive your car the way it was meant to be
driven,'" said McKeel Hagerty, chief executive of the Hagerty Insurance
Agency, an automotive specialty insurer.

So the industry began to add a new exclusion to its policies in the late
1990s, with most companies adding it within the last few years. Instead
of trying to define racing, policies exclude damage at any location that
could accommodate racing, timed or not. That eliminated coverage during
high-performance driving schools and track days.

Chris Soignier of Austin, Tex., will not be taking his Porsche Cayman
<http://autos.nytimes.com/2008/Porsche/Cayman/277/10587/294720/researchO
verview.aspx?inline=nyt-classifier>  to the track, which he had done
with his previous cars. When he read his renewal notice from Progressive
Insurance last November, he found that the Cayman was not covered on the
track.

"I don't feel like I'm that much at risk, but the magnitude of the loss
is too great for me to be comfortable," he said.

Not all drivers got word of the change, or, like Mr. Soignier, read
their new policy. Also, because insurance is regulated by the state,
exemptions in Michigan, for example, may differ from those in
California.

To make matters worse, asking insurers to clarify coverage could result
in a nasty surprise. Mike Barr, a dentist from Palm Beach, Fla., called
the insurer USAA to see if his policy covered his Subaru WRX STi on the
track.

"Some months later I got a letter from USAA saying they were going to
discontinue coverage," he said." "They dropped me because I asked about"
performance driving schools. "They confirmed it verbally when I called
to inquire further." A USAA spokesman said Dr. Barr was canceled for
"several reasons," but would not elaborate.

Some drivers reduce their exposure by getting an inexpensive track car.
As an insurance underwriter for Chubb insurance in Whitehouse Station,
N.J., you'd think Eugene Lim would be averse to risk, and he is. But he
is also a driving aficionado who is qualified as a high-performance
driving instructor. After 40 track days in his Acura NSX
<http://autos.nytimes.com/2005/Acura/NSX/227/2555/268489/researchOvervie
w.aspx?inline=nyt-classifier> , Mr. Lim discovered he was uninsured on
the track. So he bought what is essentially a disposable car. "When I
got really serious, I bought a turbo Miata. Six thousand dollars would
still hurt, but it's not my NSX," which was worth about $45,000.

Such a growing market would seem to be an opportunity - and it is.
Specialty insurers have tried offering high-performance-school
insurance.

"It was a difficult program," said Laura Bergan, vice president for
marketing at American Collectors Insurance. "Difficult as in, we were
paying a lot of claims." American phased out its performance-school
coverage last year.

American, like other insurers who have tried the insurance, ran into a
series of hurdles. To attract a pool of clients and spread risk, the
policies were priced low - an average of $500 to $750 a year, Ms. Bergan
said. The number of claims wasn't a problem, but the cost of the claims
was. "Most of the claims were total losses," she said.

Other companies tried higher pricing, but found few takers.

Cost is not the only barrier. Many drivers don't think they'll crash,
and unlike regular car insurance, track insurance is not mandated by
states. Drivers often confuse track insurance provided by clubs, which
in most cases covers only liability and injury, with collision
insurance.

The growing market still attracts new insurers. Laura Hauenstein,
president of the WSIB Insurance Agency of Jackson, Mich., which
specializes in motorsports coverage, was initially against offering
performance-school insurance. She changed her mind three years ago when
WSIB found a way to streamline the underwriting process.

"I would say we had 100, the first year or two, but this year we put ads
in Porsche Panorama," she said. "My numbers might be off - it could be
500."

The WSIB premium is 3 percent of the car's value. The deductible is
$2,500, or 4 percent of the car's value, whichever is greater. So an
experienced driver on an approved track with a $100,000 Porsche 911
Carrera
<http://autos.nytimes.com/2008/Porsche/911_Carrera/277/3227/295333/resea
rchOverview.aspx?inline=nyt-classifier>  S would pay $3,000 to cover 10
events in one year, with a deductible of $4,000. Other companies, like K
& K Insurance Group of Fort Wayne, Ind., and Motorsports Insurance
Services of Los Angeles, have begun to offer the insurance, but use a
more complex formula to price it.

Gene Cottingham, former chief financial officer of Champ Car World
Series, which held open-wheel races, knows what track accidents can
cost. So he insured his modified 2006 Mustang GT pace car for $40,000.
The $1,200 premium seemed high at first, but "when you spread that cost
over five to six weekends, it's really not that much money," he said.

"The purpose of insurance for me," he added, "is peace of mind."

 

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