Given that NSW was the first state to legalise ‘ridesharing’ it would be ironic if it also became the first to upset the UberX business model to the point of making it unviable, yet that has become a distinct possibility should the government’s insurance regulator SIRA decide to introduce a single CTP insurance category covering P2P transport - taxis, hire cars and ridesharing together - as proposed by the NSW Taxi Council in its submission to the 2016 review of P2P CTP insurance.
by Tim Hoi
Following the legalisation of ridesharing in NSW a review of CTP insurance for point-to-point vehicles was commenced in March by the State Insurance Regulatory Authority [SIRA], which regulates the NSW CTP scheme, “to ensure greater fairness in premium settings for the sector”. It includes ridesharing alongside the traditional point-to-point providers such as taxis and hire cars.
The CTP premium for a Sydney taxi today is just shy of $9,000, almost 12 times higher than the average for a midsize private car, which is about $750.
The insurers, to justify this exorbitant rate, claim that taxis are 11.8 times more likely to have at-fault accidents involving third parties. Hire cars are allegedly 1.6 times more likely and are therefore paying $1,142. These premiums are set for each category regardless of the claim history of individual vehicles.
How likely are UberX cars, as a group, to have at-fault accidents? Nobody knows! They haven’t been around long enough. There are no claim statistics, no reliable reports. Uber is making sure of that.
What we do know is that they are no longer classified as private vehicles. They are ‘private hire vehicles’, the same as traditional hire cars and have to be registered as such. Logic therefore would dictate that they should be required to carry the same insurance whether CTP, Third Party Property or Public Liability.
The challenge for SIRA (State Insurance Regulating Authority) is to decide whether the ridesharing should be in the same risk pool as taxis, or as traditional hire cars, should have its own category or all three should be in the same pool. The bigger the pool, the wider the insurer’s risk is spread, the lower the individual premium. Well, that’s the principle and it would obviously be great for taxis. Our premiums would drop substantially. But it would be a killer blow to UberX.
The ACT, in a rushed decision, has created a new CTPI category specifically for ridesharing. It’s everything Uber lobbied for. The cheapest annual CTP premium for rideshare vehicles is $621.70 offered by NRMA, only $56.50 more than its premium for an ordinary passenger vehicle. The cheapest hire car premium is GIO at $1,099.80, and for taxis $7,698.60. But sleepy Canberra is not the busy, vibrant and congested Sydney, Melbourne or Brisbane!
The NSW Taxi Council, in a supplementary submission to SIRA, is arguing strongly for a ‘one size fits all’ category for P2P CTPI.
“This category should have sufficient regulatory latitude to allow insurers to reward good operator performance irrespective of whether the vehicle is a taxi, hire car or ridesharing vehicle, and provide incentive pathways for other operators to improve their risk management in this regard”, it says.
It totally refutes Uber’s unsubstantiated claim that the bulk of its UberX drivers work less than 20 hours a week and goes on to provide substantial evidence to dispel it, pointing out that the manner in which rideshare vehicles are now operating is essentially identical to taxis. This will become even more so from 19 July when UberX is officially allowed to pick up from Sydney Airport.
The problem for Uber is that it can’t deny the Taxi Council’s claims. The proof is overwhelming.
For example, there are a growing number of UberX fleet operators, a fact Uber has acknowledged. One told the Sydney Morning Herald that he operates 32 cars approved by Uber leased out to car-less UberX drivers for up to $400 a week and that they are operating 24/7. Uber attracts more car-less drivers
Most UberX drivers I have spoken to lately drive full-time; that is, 38 hours or more a week. Very few these days drive the 20 hours or less claimed by Uber. However, 20 hours a week on the road is still three times longer that the average private car. It would be reckless of the insurance industry to ignore this fact.
Another vital fact is that Uber allows any number of drivers to use the same vehicle provided they are individually Uber ‘partners’. The car could be on the road for more hours than the average taxi. Will the NRMA, a great fan of ridesharing, ignore these developments? Will its Risk Assessment Department? It did in the ACT. Will SIRA, which like the politicians continue to insist their goal is to create a level playing field for P2P transport or is its review simply the usual stunt with the outcome already predetermined by the government?
UberX has evolved over just two years from a booking service for casual owner-drivers to a hybrid hire car/taxi booking service but Uber is still maintains its ‘20 hours or less’ bullshit. However, SIRA will be given new legal powers to demand access to the computer database of booking companies. So will the, yet to be appointed, P2P Transport Commissioner. The question is: Will they use those powers?
Uber knows exactly how many active drivers it has, how many hours they work and how many hours each UberX car is on the road. Unless SIRA demands access to this data it will be impossible to make a determination on how to regulate P2P insurance premiums fairly for all stakeholders. It is abundantly clear the way they are set at the moment is totally out of touch with reality.
All booking apps have some level of telemetric data collection. It’s up to the regulators to demand access to that data, rather than relying on information concocted by the companies. For SIRA to even classify UberX vehicles at the same risk level as (luxury) hire cars and set their premium at their current $1,142 would be unconscionable. By Uber’s own admission UberX cars operate in a greater risk environment and in the same maximum risk periods as taxis, namely Friday and Saturday nights and during special events, being the times the drivers can maximise their income through Uber’s surge pricing.
If the risk is the same, the CTP premium must also be the same but set pro rata, based on the kilometres travelled by the individual vehicle and its claims record, combined with a record of the time each individual driver is logged on to one or more booking systems. That is the only way licensed insurers, who are required to charge premiums that will fully fund their present and future liabilities under the CTP legislation, can meet those requirements.
As SIRA states in it’s Discussion Paper, issued in March: “Information on taxi and hire vehicle usage and claims is required in order to assist SIRA and CTP insurers to accurately determine the individual risk profiles of taxis and hire vehicles to set appropriate risk-based CTP premium prices”.
If that kind of flexibility is introduced it could create a level playing field in the CTPI space. •