Plan Insurance Blog

Insurance under inspection: TfL, LTDA & London Cabbies

A COMMENT piece by the LTDA entitled “TfL have dropped the Ball” in the February 9th edition of Taxi newspaper states that they believe their regulator TfL has “made some shocking decisions” relating to “minicab regs.”

Within the article the LTDA take issue with a number of Transport for London’s recent decisions.

They cover several areas but we’ll stick to what we know and focus on their stance on taxi & private hire insurance regulation.

This blog analyses the LTDA’s current position and outlines how we think the largest association of London black cab drivers can help bring about significant change, change that will benefit both cabbies and the general public by tackling Taxi Insurance Fraud.

The LTDA’s First Point

As all black taxi drivers are aware, without hire and reward insurance, passengers will not be covered in the event of an accident or another loss while travelling in a vehicle. TfL proposed requiring operators to have hire and reward “operator insurance” in place (proposal #22) which would have meant that operators would become responsible for insuring all their cars. This would have categorically ensured that all passengers travelling in a PHV in London are covered in the event of an accident.

We totally agree that it is vitally important for the general public that Private Hire drivers have appropriate insurance cover. Uninsured drivers pose a threat to public safety.

However this is due to the fact uninsured drivers might not be who they say they are. Therefore TfL cannot guarantee that they have been appropriately vetted and are fit and proper people.

In 2011 the Metropolitan Police estimated that 1125 incidents of sexual assault were committed by private hire touts. That’s an average of over 3 a day!

The LTDA’s first assertion overlooks the fact that uninsured passengers will ultimately be protected by the Motor Insurance Bureau (MIB). 

Passengers involved in an accident, in an uninsured private hire vehicle will more than likely suffer the inconvenience of delayed compensation payments – but they will be covered.

It is a fact that uninsured private hire drivers cause honest UK motorists to pay higher motor insurance premiums. 

In July 2015 the AA estimated that the 1 million uninsured drivers on the UK’s roads cost the insurance industry around £380 million a year. An average increase in their own insurance costs of £30 should be a major reason for the public wanting to see enforcement of private hire insurance regulations.

Private hire drivers have more claims and more expensive claims than average drivers due to the additional mileage they cover and the number of passengers in their vehicles that incur injuries. We estimate that there could be as many as 279,000 either uninsured or inadequately insured private hire drivers on the UK’s roads.


The LTDA’s Second Point

It (operator insurance) would have also made TfL’s job much easier: instead of having to check close to 100,000 individual policies, the regulator would only have to check those of around 2,000 operators – a much more manageable task which can realistically be completed on a regular basis.

Requiring operators to become responsible for insuring all their cars sounds great in principle but reality it wouldn’t be possible to implement.

It would not work for any driver that owned his own vehicle and wanted to work for an operator. It would require an operator to be responsible for a vehicle which is not theirs. The operator would have no ‘insurable interest’ in that vehicle.

Likewise any driver wishing to work for more than one operator could fall foul of being “dual insured.” This term applies to an issue whereby two insurance policies are held to cover just one item.

A problem arises when the two insurers involved need to decide who is liable for the cost of a claim. For example – which insurer would pay out if a vehicle was to be stolen when in a drivers possession whilst they’re not working?

The other issue is – why should an operator pay all their drivers insurance? 

They would more than likely need to pass on the cost to their drivers, in which case the drivers face the risk of being charged excessive arrangement fees by operators. As much as we believe something clearly needs to be done to correct a significant issue – would this suggestion right one wrong and create another problem in the process?

LDTA taxi newspaper image from Feb 9th issue

The LTDA’s Third Point

TfL has said it will be consulting with the trade about how insurance requirements can be tightened up, but this is not good enough. Operator level insurance is the only way to make sure everyone travelling in a PHV is covered: the failure to take this proposal forward would mean the consultation has done nothing to address the problem of the uninsured PHV’s transporting passengers in the capital.

In reality due to the number of private hire drivers that own their vehicles, the number of operators (as TfL would deem them) is far higher than 2,000.

If Operator level insurance was in place TfL would still need to carry out large volumes of checks to ensure all 100,000 vehicles owned by the operator’s vehicles are adequately covered on each policy all of the time.

One alternative could be that TFL insist that operators arrange what is known as  “Contingency cover”. This is a policy that will pay for a passenger’s injuries following an road traffic incident should a vehicle involved not be correctly insured whilst carrying passengers on the operators behalf. Doing so would alleviate the burden on the MIB, but it is only part of the solution.

It would effectively be retrospective enforcement, identifying uninsured drivers only after an incident has occurred.

What TfL have made clear is that the current processes for preventing insurance fraud in the taxi industry are completely antiquated and not fit for purpose.

Managing Director, Leon Daniels described the systems for checking insurance cover as, “Laborious, hopeless manual system with a poor trust factor due to low levels of accuracy.”

Therefore we feel, contrary to the LTDA’s beliefs, it is vital that TfL consult with industry experts to gain insight as to how to modernise their processes and provide authorities, be it: the MET Police, compliance officers or inspection centres with direct access to the information they need to rid London’s roads of rouge private hire drivers.

Plan Insurance Brokers have outlined plans for an online portal with the working title Taxi Insurance Checker (TIC) to do just that.

Working with the GMB Union Professional Drivers’ Branch  we’ve been lobbying the Insurance Fraud Bureau, the Association of British Insurers, the Motor Insurance Bureau and other related trade organisations to try and build momentum.

The appetite for change appears to be there – it just needs galvanising. With the support of the LTDA as well as the United Cabbies Group and the entire black cab community behind us we could do just that.

Read more: TfL – PLAN to tackle insurance fraud: Why cabbies are likely to be paying more for insurance than their private hire counterparts.