Barbara Bryan almost had the car keys in her hand when the Thrifty Rent-A-Car agent in New Mexico uttered an unnerving word: insurance.
Did Bryan have any, the agent wanted to know. Was she sure she was covered for any accident? Did she know how much a new car costs to replace? “They kept using all these scare tactics” to sell Thrifty’s own coverage, says Bryan, a professional fundraiser.
Bryan wasn’t swayed, and a spokeswoman for Thrifty Rent-A-Car System Inc. says the incident is not “reflective of any corporate strategy.” However, agents are trained to inform customers about their insurance options, the spokeswoman says.
The fact is that many people buy insurance they don’t need or want at car-rental counters across the country. This year alone, travelers will pay an estimated $1.2 billion on car-rental insurance in the U.S. Some won’t even realize they have bought it-until it’s too late.
“Car-rental insurance is a classic consumer ripoff,” says Ed Mierzwinski, a program director for the U.S. Public Interest Research Group. “Too many people are pressured into buying it.”
The pressure tactics include a series of questions car-rental agents are trained to ask: Are you traveling on business? (Say yes and you’ll probably be told your company won’t cover you for any part of the trip that isn’t related to business, though most companies will cover you if the side trip is brief.)
Or is it leisure? (The agent may pull out a brochure detailing the risks faced by uninsured drivers.)
Where are you going? (The agent is trying to determine if you’re a stranger to the area, in which case you might be told about the threat of thefts from the car and the need for theft insurance.)
Car-rental companies deny any trickery but do concede that they train agents to ask questions. And if many agents engage in hard-sell tactics, it is easy to see why: Nearly every car-rental company pays commissions to rental-counter agents for selling insurance.
Although no company would confirm figures, industry insiders say some agents can make as much as $5 for every insurance sale-and have the potential of doubling their salary.
“This just adds one more sleaze factor,” says Christopher McGinnis, director of Travel Skills Group, a consulting firm. “When their livelihood depends on it, they’re not going to give the whole picture.”
The car-rental companies dispute that, but they don’t deny that insurance sales are profitable. Once a very small line item on most car-rental company ledgers, insurance now accounts for about 10 percent of the industry’s revenues.
Regulators have passed a number of state laws trying to curtail the sale of car-rental insurance. Congress is even considering banning the sale of the most expensive and controversial form of insurance, the so-called collision-damage waiver. The waiver covers damage against the rented vehicle and sells for $10 to $15 a day, which could translate into more than $5,000 for one year of coverage, far more than any other car insurance.
“You almost could buy a car with all the insurance you purchase” over time from rental agencies, Mierzwinski says.
For many renters, just trying to understand car-rental insurance causes anxiety. Along with the collision insurance, car-rental companies sell liability and theft insurance. Both of these types of insurance are relatively cheap and, consumer experts say, could well be useful.
But the industry’s collision coverage is not only expensive, it is duplicated by roughly 70 percent of all personal automobile policies, according to the Insurance Information Institute. That figure has been rising steadily over the years.
What’s more, many credit-card companies offer free car-rental insurance to cardholders. American Express Co. says its coverage applies to about 30 million cardholders alone. Travelers “have to do some checking, but the vast majority of people are already covered,” McGinnis says.
During a recent trip to Florida, Kim Robinson and her husband weren’t paying attention when a Value Rent-A-Car agent asked her to initial a small box on the rental agreement.
Only after their trip ended did the couple realize they had agreed to pay $200 for insurance. “I feel like we were tricked,” she says. While Value neither admits nor denies the charge, a spokesman says the company has refunded the $200 to the Robinsons “to maintain customer relations.”
In one form or another, a lot of these complaints have been made before. In the late 1980s and early ’90s, a flurry of consumer complaints about car-rental insurance motivated a group of attorneys general to form a special task force.
In the process, dozens of states passed laws regulating the sale of car-rental insurance. Today, California, Texas and Indiana require car-rental companies to inform consumers that car-rental insurance may very well duplicate personal automobile policies.
But the laws aren’t clear about how the information has to be conveyed. Alamo says it complies in part by offering a special guidebook for consumers, but travelers have to write in for it. At some counters, Alamo also provides a document titled “Can It Be Any More Perfect?” that has a small-print explanation about insurance.
If Rep. Cardiss Collins has her way, this will all change. This year, the Democrat from Illinois proposed a bill banning the sale of the collision-damage waiver to consumers renting for 30 days or less. Meanwhile, consumer groups say that renters who don’t have personal collision coverage can still get it without dealing with car-rental companies.
Access America sells car-rental insurance for as little as $4 a day. Travel Guard offers a more comprehensive insurance product for $6 a day for people renting for more than 15 days.
