Disruption is what many businesses aim for – to shake up the game with a revolutionary product or service that changes everything in their industry. Uber is a commonly stated example, with the US-founded taxi application taking over the world, so to speak.
Now a global company, Uber allows practically anyone to become a driver of a taxi or private car, while also opening the door for quick and convenient ridesharing.
However, the company has not only made waves in the taxi market; their laissez faire approach has forced the business insurance industry to adapt. In particular, the way vehicle insurance is structured has become a point of contention.
In August 2015, the NSW Government’s Point to Point Transport Taskforce released a discussion paper on how commercial motor vehicle insurance can adapt to the growing number of rideshare services – Uber and its new-market-entrant competitors.
Specifically, compulsory third-party insurance (CTP) is not going to be enough to cover the risks of running a vehicle-centric business.
“Because rideshare drivers use a registered vehicle, they have CTP insurance.The issue for ridesharing and CTP insurance is the potential underpayment of insurance premium relative to the risk of the vehicles and drivers,” the report read.
“While passengers of rideshare services, or other road users, are covered by the CTP scheme in the event of injury, rideshare vehicle owners could potentially find themselves facing recovery action for underpaid premium in relation to CTP insurance.”
The discussion paper pointed out that Uber – to stick with this high-profile example – has a discretionary, contingent liability policy designed to work around some of the risks regarding personal and private ownership of vehicles.
Taking a wider view, it’s an interesting case study into what is involved in becoming a disrupter. It may be an attractive proposition to lead the pack, but you’ll also have to make sure you have a business insurance policy that is able to keep up.