By: Eric D. Jarvis

California and Nevada permit RACs to be "permissively self-insured". Under this scenario, the RAC, upon filing of a bond with the state, has its auto liability exposure limited by statute to $30,000. Additionally, any driver of the RAC’s vehicles who has their own insurance becomes primarily liable. Minimum liability insurance limits exceed the $30,000 liability cap. Thus, the RAC is at zero risk for all cars rented to person with their own liability insurance.

The RAC can require each driver to show proof of insurance before renting one of its cars. If the customer does not have their own insurance, the customer can buy RLP, or alternatively, the RAC can add RLP to the customers agreement without charge. In this way, the driver of the rented vehicle will always have minimum liability insurance, and the RAC will be at zero auto liability risk – all the while avoiding its own insurance costs, and making a profit on its sales of RLP.

In the legal environment of California, Nevada, and other similar states, the RLP program greatly enhances the bottom line of most auto rental operations. Following is an example of how the RLP program does this on a monthly basis:

XYZ Rent-A-Car

Current Fleet Liability Insurance Costs
	400 Cars in Fleet ---------------
	$48.00 Policy per car per month
	========== $19,200.00 Cost per month

Profit on RLP Insurance
	Cars in Fleet 80% Utilization --------------- 320 Cars/day 30 days/month --------------- 9600 Rentals per month 30% w/o Proof of Insurance --------------- 2880 Rentals w/o Proof of Insurance 80% Penetration --------------- 2304 RLP Policies Sold $7.00 RAC Gross per Policy ========== $16,128.00 RLP Gross per Month

Cost of RLP
	576 Rentals w/o Proof of Insurance $4.95 Cost per RLP Policy ========== $2,851.20 Cost per Month

Overall Profits/Savings
	$19,200.00 Premiums avoided $13,276.80 RLP Profit per Month ========== $32,476.80 Ahead per Month

Thus, for XYZ Rent-A-Car, its current costs to provide liability insurance on its fleet of rental vehicles is $19,200.00 per month. Under RLP, XYZ would avoid that insurance cost, would make a profit by selling RLP to its rent-car customers, and, even assuming that XYZ would itself purchase RLP for the remaining vehicles upon which it would remain exposed otherwise, still come out with $13,276.80 hard money profit, and be ahead each month a total of $32,476.80! This translates into an annual bottom line increase of $389,721.60, which, for many RAC clients, effectively doubles their end of year profit!

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