I admit, Lawrence probably isn’t going to cover this in his Linkswarm, and it is of interest to me partly because of my peculiar background. (I was with an auto insurance adjacent organization for quite a few years.)
But I do think there are some things in this story that are worth attention. Otherwise I wouldn’t be blogging it, right?
American Transit Insurance Company is an auto insurance company. They specialize in covering “for-hire vehicles”, which is basically your taxi cabs and Lyft/Uber drivers (at least, the ones who actually bother to get the specialized insurance they need to have). The paper of record claims that ATIC covers “60 percent of the available vehicles” in New York City.
American Transit Insurance Company is also insolvent. As in, “can’t pay their bills” insolvent. As in “can’t pay claims” insolvent.
In its latest financial filing, the privately owned company reported that it was insolvent, with more than $700 million in losses from existing and projected claims from past accidents — a huge hole that has been growing for years in part because of questionable financial practices, according to state officials.
Worthy quote:
That means American Transit does not have enough money in reserve to pay out those claims despite years of collecting premiums on those policies. Instead, the company has managed to continue operating by using money coming in from new premiums to help cover those costs, essentially leaving its current clients underinsured in the event of an accident, state officials said.
“Ponzi scheme”. The words we were looking for were “Ponzi scheme”.
That’s about the point where archive.is cuts off archiving the article, so I’ll have to summarize and use unlinked pull quotes from here on out.
What does this mean for me, Al Franken? There aren’t many companies that compete with ATIC in the NYC marketplace, so if ATIC collapses, a lot of “for-hire” cars will be without insurance, or have to pay more for insurance, which means either fewer taxis/Ubers/livery cars/etc. or higher costs, or both. Plus (and it probably goes without saying), people who have valid claims against ATIC insured drivers may not actually get paid. You got hit by an ATIC insured livery driver? Fark you, we don’t have any money to pay for your hospital bill.
How did they get this much in the hole?
…the department released two reports about American Transit’s finances from 2014 to 2019, which said that the company’s books showed evidence of accounting errors, unverified expenses and potential mismanagement.
According to the reports, American Transit paid nearly $100 million in commissions to an affiliated company for work signing up new policyholders and renewing existing policies, but the department could not confirm that the work had taken place.
American Transit also paid nearly $10 million for unclear reasons to Global Biomechanical Solutions, a consulting firm in which American Transit’s chief executive, Ralph Bisceglia, and a daughter-in-law of its co-founder had controlling interests, according to the reports.
Quel fromage! And I personally think the reasons are very clear, but publically stating them here might get me sued.
The firm submitted two remediation plans, which included rate increases and setting up a blockchain platform where policies could be bought and sold as nonfungible tokens.
You. Have. Got. To. Be. Kidding. Me. A blockchain platform. NFTs. If I were the NY State Department of Insurance, I’d be looking in every corner for the Jerky Boys or the “Jackass” guys or even for someone trying to do a revival of “Candid Camera”.
Almost from the beginning, the company had financial problems. State regulators flagged its reserves as inadequate in 1979, and later found increasing levels of insolvency in eight examinations that were conducted between 1987 and 2020.
1979, ladies and Germans. 1979.
…in 1991, state officials again filed a petition to rehabilitate the company and later moved to liquidate it.
American Transit challenged those proceedings, and in 1996, reached a settlement with state regulators that allowed it to remain in business under certain conditions, including that it be closely monitored by state regulators.
“closely monitored by state regulutors”. How’s that working out for you?
Since then, however, the firm’s finances have continued to deteriorate. Last week, state officials said they had not been approached by any credible company seeking to acquire American Transit or its insurance policies.
Ooooooh. Maybe not so good?
To be fair…
American Transit has suggested that insurance fraud contributed to its financial problems. In response to an email from The Times seeking clarification about the company’s statement this month, American Transit said that “rampant insurance fraud” threatened the commercial market and allowed lawyers and “opportunistic medical service providers” to inflate costs, undermining the insurance system.
I’m willing to concede there may be some truth to that. I mean, this is New York City…
If it is not purchased, the company could go into receivership with the New York Liquidation Bureau, which would use American Transit’s remaining assets or a state fund to pay off active claims, said Mark Peters, a partner at the law firm Peters Brovner and a former head of the bureau.
Your tax dollars at work, New York residents. Paying off for an insolvent insurance company.