Remember When ... The National Association of Insurance Commissioners (NAIC) wanted to ban the sale of insurance products at the rental car counter? We do, likely because we're geeks about rental cars!
Why does the NAIC even matter?
Founded in 1871, the NAIC has been regulating insurance providers who sell products in multiple states for the last 145+ years. What exactly is the National Association of Insurance Commissioners and who serves?
"The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories."
The association of the chief insurance officials from every state thought rental car companies shouldn't be able to sell insurance at the counter? Sounds like a slam dunk.
Except this "Remember When" is from 1989. The number one song in the U.S. was Milli Vanilli's Blame it On the Rain (not kidding). And each of the state insurance commissions had already approved the sale of rental car insurance products. It's always hard to government agencies to ban something that the same government agencies had already explicitly approved and routinely monitored. Government officials fixing a problem created by government approval? As Milli Vanilli reminded us, "gotta blame it on something" but "whatever you do don't put the blame on you".
The arguments in 1989 are identical to the arguments today:
Why Ban Rental Car Insurance Sales at the Counter?
- With limited exceptions, counter agents are neither registered with the state nor licensed to sell insurance (a highly regulated industry).
- The rates charged are not consumer-friendly, although approved by the NAIC members.
- Most renters already had (and still have) coverage through other means, a topic we discuss in our Quick Primer on Rental Car Insurance.
Why Not Ban Rental Car Insurance Sales at the Rental Car Counter?
- The individual states had already reviewed and approved the sales.
- The individual states approved the rates charged and any proposed rate changes.
- A small proportion of renters does not otherwise have rental car insurance.
How did the story end up? Well, the NAIC's trial balloon was a lead balloon. Renters still get stuck with pitches for insurance products that may be entirely unnecessary, a problem some of us have experienced first-hand. A rental car agent once wrote on my contract that insurance was mandatory*.
* That rental was entirely free after I wrote the state's insurance commissioner.
Our favorite line from the 1989 debate comes from the magazine National Underwriter Property & Casualty-Risk & Benefits Management. In 16 words, the author reveals much about the structure of the rental car industry and the timelines/hassle required to license an insurance salesperson.
"It is impractical ... to require the licensing of counter employees whose average tenure is 88 days."
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