Nov 24, 2015

The taxi industry has seen an avalanche of change over the last two or three years, not all of it welcome! However, one long term change that should be welcomed is the re-entry of the mainstream insurance industry to the taxi industry. Why has this happened and what does it mean for the industry?

A Brief History

Prior to October last year the general insurance industry had abandoned the taxi industry in Victoria, largely refusing to insure taxi vehicles for either comprehensive or third party insurance. Third party insurance is cover where a taxi is responsible for damage to the car of another driver in an accident.

There were a range of reasons behind the industry decision including a general distrust of owners, operators and drivers, and pricing difficulties arising out of the small pool or number of taxi owners and operators willing to insure their vehicles with mainstream insurers.

In the absence of cover available from “real” insurers the taxi industry was forced to turn to self insurance through taxi clubs, unregulated associations, operating outside of the regulated financial services industry. These clubs were not monitored or supervised by ASIC, their products were not covered by legislation such as the Insurance Contracts Act and their decisions could not be reviewed by the Financial Services Ombudsman.

Taxi clubs provided repair services and their policies purported to provide for both repairs to the taxi and cover for liability for third party accidents.

In reality many clubs simply refused to provide third party cover, often leaving owners and drivers liable for court enforced orders for thousands of dollars despite hollow promises to pay by the clubs.

October 2014 Changes

In October last year the Victoria government passed regulations that required all owners to accept responsibility for motor vehicle accidents, that is to indemnify the driver, and to obtain third party insurance from a government approved insurer. The reforms were intended to reduce the large number of unresolved disputes about liability for third party taxi accidents.

The Taxi Service Commission (TSC) also established a dispute resolution process to assist in cases where the owner refused to indemnify drivers. The experience of the Taxi Driver Legal Service, the TSC and mainstream insurers suggest that the October reforms have succeeded in drastically reducing the number of disputes about liability for third party accidents caused by taxis.

The effect of the reforms was to require all taxi owners to join the pool for third party insurance. This in turn made the insurance of taxis more viable for both the insurance and taxi industries. A number of mainstream insurers re-entered the market to provide policies.

Not all problems were resolved. Comprehensive insurance, cover for both the taxi and third parties was not compulsory and remains expensive or unaffordable for many owners. However, as the industry changes with more competent owners and drivers, with time on the road with each car reduced and with significantly increased cover for third party accidents through the compulsory third party insurance, there is every reason to believe that over time the cost of comprehensive insurance should become more affordable.

Indeed there may be a need for taxi industry leaders to meet with the Insurance Council of Australia and/or individual insurers to ensure that the price of comprehensive insurance genuinely reflects the risk of taxis on the road today, and not a prejudice loaded price based on the history of the taxi industry three years (light years as we know) ago.

What the Taxi Industry needs today

The taxi industry needs access to reasonably priced comprehensive insurance policies provided by mainstream regulated insurers. This will ensure that:

Unfortunately, many owners and operators continue to “insure” for taxi repairs with the unregulated and often untrustworthy taxi clubs to obtain the short term advantage of cheaper premiums. The benefits of these arrangements are too often illusory. The long term interests of the industry will be better served by a transfer of owners to the more transparent and regulated mainstream insurance industry.

A cheaper premium is of little value if the taxi club disappears, your taxi is not repaired, you are ripped off or you end up in Court!

If owners or drivers need advice on insurance or motor vehicle problems contact the Taxi Driver Legal Service on 9689 8444.

Denis Nelthorpe
Executive Director
Footscray Community Legal Service