Insurance Helpline | Insurance retention tough for taxi drivers

QUESTION: My son is the driver of our taxi. He took over after his dad got too old to do so. Last year, he (the son) had two accidents. In the first one, the taxi was hit by a bus that did not stop. In the other, he hit another car. Both accidents were reported to the police and the insurance company. The company is now refusing to insure him. This can't be right. How can they take away his livelihood when PPV insurance is mandatory? What can I do to fight this? We have insured with the same company for 20 years.

- Mother of Taxi Driver

INSURANCE HELPLINE: Today's question was posed in an email that was sent to me at 12:42 p.m. last Tuesday. The email came from the producer of Every Woman, which is broadcast on Nationwide Radio. I was asked to get ready to answer the question by 1:05 p.m.

Yes, you did not make a mistake. I was allowed 23 minutes to stop what I was doing, conduct research, organise my thoughts, and prepare to take part in a radio discussion with a host whose knowledge of the subject, in all probability, was limited to the mother's 99 words.

I ignored my instincts not to participate. A few years ago, I decided that radio interviews were a waste of time. When the programme ended after 50 minutes, I felt that the matter remained unresolved.

The mother-son PPV motor insurance problem is said to be very common. Getting and keeping motor vehicle insurance for public passenger vehicles (PPVs) is not easy. I will use my 'soap box' in this newspaper to throw more light on the subject.

THE HISTORY

The imbalance between the supply and demand for insurance for PPVs has existed for some time. It began, perhaps over 30 years ago, when most motor insurers quietly decided to discontinue the pooling agreement they made during the 1950s to write insurance for PPVs.

The cause: losses due to the frequency and costs of accidents.

Insurers have not found a replacement and only two or probably three insurers now write insurance for PPVs.

Fast-forward to 2015. A group of which I was member met with some of the leading taxi owners and operators. The gist: They wanted to form their own insurance company; existing insurers were ripping them off; PPVs were good insurance risks; PPV owners and operators' insurance company would charge reasonable rates and consistently record surpluses, which would benefit shareholders.

No funds were made available to gather data to test the assumptions on which those rosy conclusions were founded as the first stage of finding out if the idea was feasible.

THE PRESENT SITUATION

Data from the Planning Institute of Jamaica indicate that six years ago, 21,563 licences were issued to PPVs. That number grew by 13.4 per cent from 2007. If the number of licensees increased by the same rate during the 2011-2016 period, there would be about 24,500 licensed PPVs.

In an article dated May 15, 2011, "Market for PPVs smaller, less competitive," I wrote that there is no guarantee that coverage that is mandated by law will be available or that persons who were involved in accidents, non-owner-driven vehicles, owners/drivers who do not report accidents or who are suspected to be involved in 'bandooloo' activities, persons under 25 years old with less than three years' claims-free driving history will find it very difficult to get coverage, and if coverage is offered, it will come with a big price tag. When I tried to get a quotation for my hypothetical PPV by telephone, for example, the person at the other end wanted me to disclose my taxpayer registration number (TRN) before offering terms companies that still insure PPVs have taken steps to avoid granting coverage to owners/drivers who are seen as unlikely to reduce the insurer's operating losses.

It became crystal clear during the discussion that I had on radio that what I predicted six years ago has, unfortunately, now come to pass.

The decisions that insurers make about who to insure and who not to insure are seldom influenced by moral arguments like 'Is this the right thing to do?', 'Or is this person being put out of a job?', but rather by two words: profit or loss.

The fact that the family has insured with the company for 20 years means diddly-squat if the payout to the third party for the second accident exceeded the premiums your son's dad paid over two decades.

The bonds between most mothers and their sons remain unbroken no matter what. I would not be surprised, therefore, if the taxi driver's mother tried one last time to persuade the insurer to insure her son. Good luck!

If the attempt fails, there is no reason why the vehicle cannot be sold and the proceeds from the sale used to fund the son's entry into a line of business that is less risky and offers better returns than taxi driving, bearing in mind what is happening elsewhere in the world with ride-sharing companies like Uber.

- Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to aegis@flowja.com.