It’s Not a Duck

The National Assn., of Insurance Commissioners is proposing model legislation to bring under control collision damage waivers on car rental agreements. They are on the right track.

Most consumers, as best we can tell, think they are buying insurance when they initial the little square at the car rental agency counter. Indeed, not a few of the smiling young ladies who staff the counters ask, “Do you want collision insurance?” as they complete the formalities. Technically, it is not insurance but a legal agreement whereby the rental company agrees, for a fee, to waive costs arising from collision damage.

The damages for which the renter can be held responsible are substantial, as much as $2,500, if you read the fine print. But the waiver, too, is costly, as much as $8 a day. Our staff writer, S. J. Diamond, recently came upon a visitor who had paid, in less than three weeks, the equivalent of half a year of full insurance for the family car at home in New Jersey. Furthermore, many people already are covered for the risk by their own insurance policies but sign up out of ignorance.

Car rental officials insist that their fees reflect their costs, which is hard to believe. After all, $2,920 is a substantial fee to provide $2,500 protection for one year.

We agree with Diamond when she wrote: “To most people, what looks like a duck and walks like a duck is a duck, and these companies certainly seem to be selling insurance coverage by assuming that $2,500 risk.” The state insurance commissioners are right in recommending model legislation. The California commissioner should support the legislation so that the state can get busy regulating this practice.