In June this year, Crowe Insurance announced that it would no longer underwrite business for Stella Black, one of the UK's biggest taxi intermediaries. The market has become so limited that last week, Northampton-based wholesale broker Servico announced that any broker that wanted to place taxi business through it would have to pay a £60,000 charge.
The market is now in turmoil. The majority of insurers have pulled out or scaled down their involvement in the sector over the past two years, citing poor underwriting results. Many have said the rising number of injury and accident claims played a big part in these poor results.
Some have gone even further, blaming fraudulent claims by taxi owners, operators and passengers for driving insurers from the sector. All agree it is no longer a market for the faint-hearted as the risks have increased greatly.
Ron Spore, head of commercial fleet underwriting at Crowe, says the company has reduced its taxi business after being stung by poor results in recent years.
“A huge factor in these poor results is the increase in passenger injury claims, including a significant rise in fraudulent claims,” Spore says.
“Crowe's attitude to taxi insurance is that we'll continue to write a book of taxi insurance on a selective basis [but] we're not looking to write a volume of taxi business.”
Crowe has been more fortunate than many – London law firm Keogh's had a landmark win in June when it took a fraudulent claim to the civil court for Crowe.
Keogh's special claims unit boss Howard Young says he believes it is the first time a judge has accepted an insurance company's plea that it should not pay out to a claimant because the claim was fraudulent.
In Crowe's case, its policyholder genuinely claimed he had been reversed into by the claimant. However, the claimant said Crowe's policyholder had shunted him and alleged excessive damage to his car and injury to himself and his passenger.
Booming business
The judge found that the claimant had presented the accident fraudulently and also that there was no passenger in the vehicle, but Young says such a decision is usually hard to win.
“Fraud is very difficult to prove,” he says. “There's almost the same burden of proof as in a criminal case.”
He says that taxi insurance fraud could be described as a cottage industry in some areas of the country.
He is investigating a case that involves five insurers, ten accidents within 12 months and three key players who use six different addresses but appear in each of the claims.
“There are certain areas of the country in which the taxi community is heavily involved in the various guises of motor fraud,” Young maintains. He says that fraudsters target particular insurers, such as those without investigation units or that are known to have paid out similar claims in the past, with some staging accidents every five or six weeks.
It is common for the same individuals to appear in several claims, swapping roles as the driver, passenger and witness each time. Salvage yards are also in on the scam in many cases, he claims, with some cars being written off up to three times yet continuing to appear in claims.
Young talks of other cases, where when it becomes clear the car's MOT will not be renewed, some drivers set alight the car, burning themselves in the process, then put in an injury claim, saying the motor blew up and burned them.
He says the expense involved, often up to £30,000 a claim, has a visible affect on the insurance industry.
New culture
“I think a lot of them [insurers] are very circumspect about taking on taxi fleets; it has a huge effect on the premiums,” Young says.
He says insurers are taking big strides toward establishing an anti-fraud culture and are not to blame for allowing some fraudulent claims to slip through.
“These [claimaints] are clever,” he says “It's a misconception that these things are just staring insurers in the face in neon lights.”
Allianz Cornhill's manager of commercial motor insurance Roger Ball says his firm has also curtailed its taxi business for the present.
Ball says the underpriced market of 1998 has hardened, and third-party claims increased as people become more litigious, making it difficult to profit from taxi work.
“It's a whole range of factors: the market was soft up to a year, year and a half ago, but now rates have increased quite a lot,” he says.
“The impact of rising third-party costs have gone with that, the exposures are increasing all the time.”
Insurers that have remained in the market do so by being careful with whom they do business.
Norwich Union (NU) launched its Taxi! product in April 1999, catering for three levels within the market. NU business motor segment manager Richard Green says his company's writing in each of the levels – schemes, specialist intermediaries and general intermediaries – is selective.
“The taxi market has always been one where you need to take a great deal of care,” he says. “We've always been quite restrictive,” he adds.
For example, Ball says NU will not offer taxi cover in big city centres to general intermediaries, as those areas are considered high risk and require specialist knowledge.
And, even as a believer in the market, Ball says that the taxi business is becoming riskier.
“Overall, the trend of third party injury costs is rising,” he says.
Manor Insurance Services principal Ian Mantel agrees with Ball that many insurers have suffered as the previously soft market hardened.
Mantel, a broker specialising in taxis, says
premiums now are at the same levels as in 1990, as opposed to the “ridiculously low premiums of 1997 and 1998”.
“Too many insurers granted authority to brokers a couple of years ago,” he says. “Certain insurers seemed to jump on the bandwagon to make a quick profit.”
Mantel says taxi insurance can still be very profitable but advised care when taking on clients.
“Be careful, be firm and, if someone doesn't want to play by the rules, don't play with them,” he warns. “You don't get cover with us if you can't show us your licence or badge.”
