EXPERT OPINION: The impact of ride-hailing apps like Uber and Bolt on the insurance market

The rise of ride-hailing giants like Uber and Bolt has significantly altered the landscape of the taxi industry, causing a ripple effect that has now reached the insurance sector, according to industry experts.

In a blog post, a spokesperson from Patons Insurance highlighted the shifting dynamics and the implications it has had on insurance coverage and premiums.

Traditionally, taxi operators were categorised into two distinct groups: black cabs or Hackney carriages, which required public hire insurance, and private hire vehicles (PHV) or minicabs, which needed private hire insurance. However, the advent of ride-sharing services has disrupted this conventional model, prompting insurers to reassess their strategies.

As ride-hailing companies have gained global prominence and issues surrounding driver employment status have been addressed in the UK, the distinction for taxi insurers has become clearer. Ride-hailing operators are now classified as private hire vehicles, necessitating private hire insurance. Moreover, these vehicles must be pre- booked in order for insurance coverage to be valid.

Controversially ride-hailing allows drivers to operate in various locations, unbound by geographical limitations. For instance, a driver licensed in Chester can accept a ride-hail fare to Manchester Airport and continue operating throughout the night in and around the city centre. While this expanded flexibility improves PHV capacity and caters to increased demand, it also poses certain risks.

Drivers operating in unfamiliar territories may face a higher likelihood of accidents due to the lack of familiarity with local traffic patterns and road conditions. The resulting claims on their taxi insurance can have implications for both coverage and premiums. Notably, insurers consider the level of risk associated with a specific area when calculating premiums, with higher-risk locations attracting higher costs.

The spokesperson emphasised that while Chester would typically be classified as a lower-risk area, Manchester— especially its city centre during nighttime or weekends— would be deemed higher risk. The presence of ride-hailing drivers in these busier and unfamiliar zones increases the chances of accidents and subsequent insurance claims. Insurers adjust premiums accordingly to reflect this heightened risk.

As the taxi industry continues to evolve, with ride-hailing companies reshaping traditional dynamics, the insurance sector has been compelled to adapt accordingly. Insurers face the challenge of striking a balance between meeting the changing demands of the industry and managing risk effectively, all while providing fair coverage and pricing options for drivers.

A Patons Insurance spokesperson added on their blog: “As with any insurance, the higher the risk, the more likely there is to be a claim and if there is a pattern of incidents in higher-risk areas, a driver’s taxi insurance premiums will increase to reflect this.”