Insurance industry stakeholders, including alleged victims, lawyers and consumer advocates have told Insurance Business that increasing numbers of drivers in Victoria are falling victim to allegedly substandard motor coverages sold by rideshare taxi clubs.
The clubs are allowed to sell insurance style coverages under the state’s laws for incorporated associations and societies.
IB has now received responses on this issue from financial services regulators, including ASIC and APRA.
In an earlier interview, Joseph Nunweek, WEstjustice legal director, suggested that Victoria’s own regulator could be best placed to take action against rideshare taxi clubs.
Some clubs register as incorporated associations with Consumer Affairs Victoria (CAV) to do business in the state.
“There is obviously a space for Consumer Affairs Victoria, as a consumer watchdog in this state, to check the conduct of incorporated associations,” said Nunweek. “CAV certainly has the ability to look at things in terms of ordinary application of the Australian Consumer Law (ACL).”
In an emailed response, the state regulator told IB that it received 31 contacts about rideshare clubs, including inquiries and complaints, during 2023-24.
However, CAV said the rules of an incorporated association are set by the terms of a contract between the association and its members. The regulator said it cannot intervene in breaches of these rules involving members and the incorporated association.
“We encourage anyone with concerns about a registered incorporated association to contact us for advice,” said a CAV spokesperson.
Nunweek also said, despite being outside the rules of the ASIC Act and so not holding Australian Financial Services Licenses (AFSLs), there is still an argument that this regulator could investigate any “misleading conduct” by these clubs.
“If you're wandering around offering something you're not and it's a financial service, we do think there’s scope there for ASIC to take a long hard look,” he said.
In a response to IB, an ASIC spokesperson agreed with this view.
“If providers of these products suggest to consumers that they are offering insurance, they may be engaging in misleading conduct, in breach of both the consumer protection provisions of the ASIC Act and restrictions on the use of the term 'insurance' under the Insurance Act,” said the spokesperson.
The spokesperson also elaborated on the rules that allow these clubs to operate.
“Taxi clubs often structure themselves as associations incorporated under state-based law and this means parts of the Corporations Act, including AFSL licensing requirements, no longer apply to them,” said the spokesperson.
The regulator said that incorporated associations are offering alternatives to traditional insurance products, including discretionary mutual funds.
“While these products are similar to insurance, they are generally not [ASIC’s bold text] traditional insurance policies – and, unlike traditional insurance policies, providers have discretion as to whether to accept a valid claim,” said the spokesperson.
The spokesperson said ASIC does not have jurisdiction over discretionary mutual funds and associated risk products in circumstances where they, or the associations offering them, are excluded by state-based legislation. However, the spokesperson said ASIC expects providers of alternative products “to make it clear to consumers that they are not offering insurance.”
The websites of these clubs often describe their offerings as “cover” rather than insurance. However, website banners and text mention “compulsory third party coverage” and “comprehensive motor vehicle coverage,” which could be interpreted as suggesting the offerings are the equivalent of, if not insurance.
Anecdotal evidence from victims, lawyers and advocates also shows that both CAV and ASIC have been approached multiple times about allegedly substandard insurance style coverages offered by these clubs.
IB also reached out to APRA. This regulator’s purpose, according to its website, “is to ensure Australians' financial interests are protected and that the financial system is stable, competitive and efficient.”
It also has general responsibility for administration of the Insurance Act. In an emailed response, a media person said APRA does not regulate taxi clubs.
Another insurance industry stakeholder is the Australian Financial Complaints Authority (AFCA). This independent dispute resolution body can only consider financial complaints concerning AFSL holders whose membership fees fund its operation.
“It is imperative that ASIC and APRA take action to ensure that all insurance providers are properly registered and regulated,” said Nasralla from Griffith Barton. He said enforcing compliance with insurance requirements is the only way to protect drivers and uninsured third parties.
Are you a motor insurance stakeholder? What do you think of rideshare taxi clubs allegedly selling coverages and what can regulators do? Please tell us below.
