By Cedric E. Stephens, ContributorQUESTION: I own and drive a taxi. I have done so for the last 10 years. The premiums seem to rise every year. In the last five years, they have gone up by more than 100 per cent. I have never been involved in an accident. Can you please explain to me why the cost of my insurance keeps going up? What can I do to keep it down?
- B.R., Kingston 5.
ANSWER: I had a scary incident in a taxi about two weeks ago. That short ride should provide some of the facts behind the frequent increases in your motor insurance premiums. The taxi-man broke every rule in the book. That is, except manslaughter. The coup de grace was a U-turn. We were travelling west along Hope Road, below the hospital, in the left lane. The right turn took place in front of another vehicle, going in the same direction, in the outside lane. We then entered the easterly lanes, in front of speeding, oncoming traffic. Next, we made a sharp left turn to enter Kingsway Avenue. The driver laughed when I criticised his driving. "Cho man, we drive taxi and do this every day."
Insurers, and even other motorists, consider taxis to be in a high risk group. I have not seen any local statistics to support this view. I believe that this opinion is based on anecdotal evidence. What I know is that the problem is not limited to taxi-operators in Jamaica. A report published six months ago suggests that taxi drivers across the Caribbean are facing the same problem. Maxi taxi drivers in Trinidad & Tobago, who operate 25-seater buses on a defined route, were paying the equivalent of US$833 for third party coverage. What is more, operators there had to bear substantial amounts in the form of deductibles. T&T insurers blame the rising costs of coverage on the accident record of taxi operators there.
Are T&T insurers telling the truth? The performance of the insurance industry gives us some clues. Insurers there made very little on motor insurance between 1998 and 2000. Their payout for claims and other expenses ranged between 105.7, 104.7 and 99.7 of each dollar of premium earned. Although I have not seen any more recent figures, I have it on good authority that the situation has not improved.
Local insurers are not doing any better. Their financial results are there for all to see. None of the individual results for 2002 I have studied suggests that they are making any serious money. Admittedly, I have not seen the report for the island's largest motor insurer. However, if the results of the second largest are anything to go by, their loss ran into the hundreds of million. In the previous year, the industry reported a loss of $44 million. I cannot remember a time during the last five years when the industry made any money on motor insurance.
The uncertainty in the economy, plus the recent hike in taxes and the fall in the value of the dollar are bound to have a knock-on effect on insurance costs. Motor premiums, if anything, are likely to go up at a faster rate in the future. Here is what I suggest you should do to lessen the impact of future price increases:
Invest in defensive driving course. This should help to sharpen your driving skills and lessen the chances of your getting into an accident.
When the renewal date of your policy approaches, shop around. Make sure that the prospective insurers know that you are not a member of the typical bad-driving taxi-men that are a menace to other road users. Tell them about your defensive driving course and try to negotiate a special discount.
Maintain your vehicle in good running condition.
Carry more risk by taking a bigger deductible in exchange for a discount off the premium.
There is not a simple or a short term solution to your problem. You have taken an important first step by seeking information. This approach is so different from that of your colleague in New Kingston. He took years off my life and remains firmly in denial - like most taxi-men - that he does not have a problem.
Cedric E. Stephens provides advice on risks and insurance. If you need free information or advice to solve a problem, write to The Financial Editor or, contact Mr. Stephens directly at aegis@cwjamaica.com
