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The Flaws of “Operator’s Insurance”

The Flaws of “Operator’s Insurance”

Posted by Daniel Severin on May 3, 2016.

Sales Manager Daniel Severin reviews the taxi trades latest proposal to prevent Taxi Insurance fraud.

I have been working in the insurance industry now for nearly 17 years, and for a majority of this time I have been some way connected with insuring Private Hire Vehicles and Taxis.

In addition to my insurance background, my Granddad, both his brothers and my Nan’s brother were all Green badge holders.  Plus I have several close friends and family who are either Cabbies or Private Hire drivers in London and the North. (But if you ask them it’s the midlands)

Not to ‘blow my own trumpet’ or appear to be a ‘know-it-all’,  I think I am well placed to understand the issues currently going on in the trade, and I understand the implications that a mandatory insurance requirement could have to the Private Hire industry.

 

Firstly I will say – I am all for public safety and ensuring the streets of London (and the UK) have fully licensed and correctly insured drivers on them.

However, I think the currently proposed mandatory operators insurance being put forward has flaws; and cannot work as it is currently presented.

So what are these flaws or issues that cannot work? Let me highlight only a few from several I have:

 

What if a driver works for more than one operator?

 

This vehicle could then be dual insured. This is where two insurance policies are held to insure just one item. Drivers who work for more than one operator could even end up being tripled insured or more…

This could lead to duplicate payments being made and fraudulent claims being made. You might say – well whatever company supplied the booking; their insurance pays.

But what if the driver is not on a job? He is going to the shops or what if the vehicle is stolen or vandalised at his/hers home at night.

Who pays then? The driver? The operator? – This would be a Loss adjustor’s and admin nightmare!

What if it the driver owns the vehicle?

 

The operator has no insurable/financial interest in the vehicle if the driver owns the vehicle.

So therefore it would make claims payments difficult.

The insurer would need to know whose vehicle it is and full details from the driver in the event of a claim. Then what happens if this driver does not reply to the operator or has a disagreement with the operator?

This would require the operator updating their list of drivers and vehicles to their insurer on a weekly if not daily basis. It would become an admin nightmare. Not only being very hard to get an insurer to agree to something where the policyholder i.e. operator has no insurable interest in what they are insuring. 

Operators obtaining the insurance

 

The public/TFL/drivers etc would still need to rely on operators getting the insurance. The operators could still potentially commit fraud. What if the operators took out insurance and then cancelled it; how would the driver know?

Drivers could be held to ransom by operators demanding money from them for the insurance cost. Then who decides what each driver pays?

What if one driver has an accident and impacts the renewal? – Should all the other drivers have to pay for this?

TFL supplying / or one person supplying this insurance

 

I think that if this type of insurance (operator’s insurance) was made mandatory by TFL, and TFL said you needed to buy ‘our’ insurance – then the fair trading and competition commission might want to get involved.

This is because there would then potentially be no freedom to the drivers/operators to pick their own insurer.

 

So what can be done Dan, I hear you say?

Last summer I was talking to Steve Garelick from the GMB about tackling document fraud. He suggested an idea of issuing documents with holograms on special paper, like a bank note.  At first this seemed a good idea; however in view of the digital age and everyone liking emailed/electronic documents, how would holograms and special paper be sent via email?

 

After a bit of brainstorming I came up with the idea of an online portal where documents could be verified by entering a code that appeared on the document.

The portal would then display certain information based on this code; so that the person/authority checking the document could be sure it had not been tampered with or altered.

Read our BLOG to find out more.

TIC- Plan Insurance Brokers

 

 

In addition to this it could then be used by authorities / licensing bodies / TFL to carry out spot checks on vehicles in real time to see if they are correctly insured, and also have automated notifications sent to them saying a policy had been cancelled etc.

Now obviously this requires a lot of buy-in from insurers to want this system and update it.

However as some of you may know already all insurers are responsible for updating the Motor Insurance Database (MID), so since this could save insurers millions in fraud – and they already send this data on a regular basis – sending any additional data should not be a hard sell or difficult for them to integrate.

From the few insurers I have spoken to already they are all keen and would be on-board with this idea.

 

 

If you want to know more about this idea – T.I.C (Taxi Insurance Checker) then have a look at the blogs and articles we have released:

Read more: TfL – PLAN to tackle insurance fraud

Read more: Insurance under inspection: Tfl, LTDA & London Cabbies

Twitter: Explaining our stance on “Operator’s Insurance”

 

 

I hope this has helped clear up some issues and highlighted some concerns about the proposal.

What started out to be a quick paragraph on this subject turned into a lot more – but I think this is only because I am passionate about the trade and the industry.

I am more than happy to take questions and give my view on any proposals from an insurance professionals view; and would relish to chance to take part in any discussions going on with this. So feel free to get in contact.

 

Let’s do what we can to improve this industry and trade!

marketing@planinsurance.co.uk

Meet the Author Daniel Severin

With over a decade of commercial insurance experience and a CII qualification, Daniel will provide informed views on commercial motor and insurance industry news. He's also a bit of a tech Geek, so don't be surprised if a few gadget/app reviews appear here.

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