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Taxi drivers in Newfoundland and Labrador are up in arms as their premiums have shot up 234% over the past four years.
The latest rate hike of 25.6% on March 01 pushed Jiffy Cabs from St. John’s to complain the insurance costs are putting the entire province’s tourism sector in jeopardy.
Newfoundland’s, and indeed all of Atlantic Canada’s, taxis are covered by the industry group and residual market, Facility Association.
The president and CEO of Facility Association, David Simpson advised brokers to tell their clients why costs are rising.
“The taxi experience for Newfoundland and Labrador - we see them having at-fault losses at the rate of approximately six times that of private passenger vehicles and about eight times that of commercial vehicles,” Simpson said, adding that the claims severity is higher than other commercial autos as well.
“The at-fault losses are driving premiums. In a typical market, the broker is there to help the client shop around for the best place. But as long as we’re selling the insurance below cost, there aren’t any alternatives in Newfoundland and not likely to be.”
Simpson said rate hikes were to cover future losses and “from 2011 to 2015 inclusive, the cost of claims exceeded premiums by about $5.5 million”.
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The latest round of premium increases started back in 2013 and another rate hike next year isn’t off the table either, according to Simpson.
“Should we have moved sooner? Perhaps. But first we have to understand there’s an increase in loss trend and when we get it one year at a time we see the loss costs go up we don’t know if we’re looking at an unusual year or the start of a trend,” Simpson said.
Other rates aren’t available for taxis in the Maritimes because it’s not a profitable business to write, Simpson explained, saying the auto insurance industry is subsidizing the cabby trade.
“The industry is simply saying ‘this is a high risk business, we’re going to take on the risk collectively through our industry association rather than take it on individually,’” Simpson said.
“Contrast that to Ontario where the majority of the market is insured through competitive enterprise, individual companies… presumably, companies in Ontario, for example, feel like they can write taxis and make a profitable business out of it.”
The Facility Association is bound by law to serve the eligible businesses that ask for coverage.
