| | |  Business News 
A Bumpy Road for Mexican Auto Insurers
 Leslie Berestein - San Diego Union-Tribune
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March 14, 2010
| | Josie Knechel helps run Baja 4 Less Mexican Auto Insurance Services in San Ysidro, which is among the struggling businesses that sell auto insurance policies for travel to Mexico. (John Gibbins/Union-Tribune) | MEXICAN INSURANCE
• Mexican insurance is required for all vehicles, including rental vehicles.
• Policies are sold in most cities and towns along both sides of the border.
• U.S. automobile liability insurance is not valid in Mexico, nor is most collision and comprehensive coverage issued by U.S. companies.
• Motor vehicle insurance is considered invalid in Mexico if driver is found to be under the influence of alcohol or drugs.
SOURCE: U.S. State Department | |
In the days when the Baja road trip was a Southern California ritual, southbound tourists, surfers, campers and racetrack aficionados would start lining up Friday afternoons at the ubiquitous Mexican auto-insurance shops near the border, idling at the drive-up window as they waited for a policy.
“I can remember before Interstate 5 was where it is right now, that the traffic used to back up all the way to Coronado Boulevard to go to Caliente on weekends,” said Fred Sobke, co-owner of Bajamex Insurance Services, who has been selling auto policies for 40 years. “People used to line up here going camping. It was a beautiful time, it really was. Everybody enjoyed it. It was just the place to go.”
Not so much anymore. And as former Baja California road-trippers and spring-break revelers have opted to stay home or go elsewhere in the wake of drug-related border violence, more travel regulations, higher gas prices and a tight U.S. economy, businesses that sell auto insurance policies for travel to Mexico are struggling.
The roadside insurance shops lining Interstate 5 in San Ysidro and other border crossings leading into Mexico have had to decrease staff and diversify their services to get by. Those who sell insurance online say they’re surviving a little better, but business is still down.
“Everyone is hurting with no one crossing,” said Jason Wells, executive director of the San Ysidro Chamber of Commerce. “They have pretty much lost all their clientele. It is very bad for them right now.”
Insurance sellers say the remaining clientele for Mexican auto policies consists largely of long-term policyholders, such as business travelers who cross regularly for work, or American expatriates who live in Mexico.
They still sell auto liability policies to Mexican citizens traveling by car into the United States, and once in a while there are groups making longer trips south. U.S. citizens and legal residents of Mexican descent who drive to Mexico to visit family are also a source of revenue.
And there is still the occasional casual tourist, “but it’s about 80 percent down, compared to how it used to be,” said Fred Knechel, business manager of Baja 4 Less Mexican Auto Insurance Services in San Ysidro.
“The day trips to Ensenada, Puerto Nuevo, where families would go just for one day to visit Mexico, that is way down,” he said. “We’ve had to cut overhead as much as possible. We’ve had to let two employees go and limit hours. I don’t know how much more we can cut.”
Sobke, whose company includes 11 offices in San Diego County and a border parking lot, said one way he had diversified is by expanding his currency exchange business, although that is down as well. So is business at the parking lot, once busy with visitors to Tijuana who would leave their cars on the U.S. side and walk across the border.
While auto insurance is not required for entry to Mexico, motorists there are required to have liability insurance, and foreign-issued auto liability policies are not recognized.
The industry that caters to Mexico-bound drivers took root in the 1950s as a growing number of U.S. travelers took to exploring Mexico by car, Sobke said. Today, he said, a three-day comprehensive policy costs about $57 for a car worth $20,000.
As do hotels, restaurants and other tourist-dependent businesses in Baja California that have been hurt by the decline, the insurance sellers on the north side blame bad publicity from a rash of drug-related violence in Tijuana, high gasoline prices, economic woes in the United States and new federal travel regulations that kicked in last year, which they say made an already bad situation worse.
As of last June 1, U.S. citizens returning to the country by land or sea must present a passport, passport card or other secure document; in the past, a driver’s license would do, allowing for the kind of spontaneous travel that made money for Mexican insurance sellers.
“It seems like a perfect storm as far as people crossing to Mexico,” Knechel said. “First, you have the drug situation, where everyone has to be afraid, then you have the requirement for passports. ... It just seems like everything is against anyone crossing for the day.”
Jeff Nordahl, owner of Santa Cruz-based Adventure Mexican Insurance Services, said that one steadfast part of his clientele is the Mexican-born traveler who drives home to visit family.
“They are not spooked at all,” Nordahl said, whose company does the bulk of its business online. “Things have slowed down (for them) a little bit, but that is just due to the economy, the price of gas. None of them are concerned about the violence or anything, because they can cut through the hype.”
Nordahl said his insurance business, which sells Mexican auto policies to travelers in Canada and in non-border states such as Nebraska and Colorado, has picked up market share as some part-time operators, such as those who sold insurance out of gas stations, have dropped out. Still, he said, it’s a smaller pie for everyone.
Nordahl was dismayed to see empty campgrounds and near-empty whale watching boats during a recent trip he made to the southern tip of the peninsula, stopping in once-popular surfing and camping spots along the way. “I’m surprised we are selling as much insurance as we have.” “It’s kind of a ghost town down there.”
State and local officials in Baja California have made efforts to boost security in tourist areas, such as the creation of a tourist police unit in Rosarito Beach, a onetime favorite spring break destination. The city reported a drop in its crime rate last year, but travelers are reluctant to return.
“In a way, it’s not fair,” said Sobke. “Yes, there have been a few situations where innocent bystanders have been hurt or killed, but the likelihood of that happening is extremely remote.”
The road-trippers have come back following brief lulls in the past, Sobke said, even after the fear that gripped the nation following the 9/11 attacks. This time, there doesn’t seem to be a recovery in the near future, he said.
“This is definitely long-term,” he said. “It is really a shame.”
Leslie Berestein: leslie.berestein(at)uniontrib.com
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