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​NSW reviews car insurance after legalising Uber-like services

The New South Wales government has announced a review of the CTP scheme in the wake of legalising point-to-point transport, saying previous guidelines do not take into consideration vehicles registered for ridesharing purposes.

The New South Wales State Insurance Regulatory Authority has called for the review of Compulsory Third Party (CTP) green slip insurance for point-to-point transport vehicles, less than three months after it legalised ridesharing services such as Uber on Sydney's roads.

According to Minister for Innovation and Better Regulation Victor Dominello, the purpose of the discussion paper [PDF] is to better align the state's CTP scheme to reflect the point-to-point transport market and the changing dynamics of the sector.

"This review will clarify the CTP price and regulatory disparities that currently exist between taxis, hire cars, and rideshare services," Dominello said.

The paper discusses the "perceived disparity" between the rules and prices associated with different classes of point-to-point transport vehicles; explores a more flexible approach to vehicle classifications and premium regulations; and aims to ensure that operators in the point-to-point market face consistent and fair approaches to premium setting.

Although the industry is privatised, the NSW government will not register a vehicle in the state unless the owner has purchased CTP insurance. CTP insurance protects the owner from being personally sued for any injuries their vehicle causes to passengers, the drivers and passengers of other vehicles, pedestrians, and cyclists, who can make a claim on the vehicle owner's insurer to receive the support they need as a result of injuries incurred, the paper says.

Usually, when applying for a green slip, the owner specifies if their vehicle will be used for business or personal use -- with no option for selecting ridesharing, a service only legalised in December.

"Since the government legalised ridesharing, new entrants to the market have been welcomed. However, we need to reconsider how CTP rules and prices are set to ensure greater fairness in the sector," Dominello said.

"There are 5 million green slip holders and the scheme provides benefits to 'not at fault' injured road users. Taxis and hire cars are insured as a separate vehicle class, while rideshare services are mostly included in the general pool of passenger vehicles."

If an UberX driver needs to specify that their vehicle will be used for ridesharing purposes, they may need to a pay a higher premium to their insurance company. Currently, taxis are categorised under Class 7, private hire cars under Class 8, and standard personal cars under Class 1; all of which cost different amounts based on the main driver's age, driving history, and type of car driven.

The paper reports that the current average premium for a metropolitan passenger vehicle in NSW is AU$637.

"Rideshare services were previously unregulated and are often indistinguishable from the rest of the general pool of passenger vehicles," the paper says. "They are not specifically identified to the Roads and Maritime Services (RMS) or the CTP insurers as ridesharing vehicles."

As a result, the NSW government is reviewing the CTP scheme, from which it wants to achieve four key objectives for reform: Increase the proportion of benefits provided to the most seriously injured road users; reduce the time it takes to resolve a claim; reduce the opportunities for claims fraud and exaggeration; and reduce the cost of green slip premiums.

"With the emergence of ride share services in NSW, the NSW CTP scheme now faces a number of challenges in ensuring the insurance framework supports ride share services on a level playing field alongside traditional forms of point-to-point transport," the paper says.

The discussion paper offers six options it thinks may be suitable for how to best solve the problem it says the state has.

Option one suggests the creation of a new vehicle class for rideshare services, with vehicle owners required to identify themselves as just that, and a separate ridesharing vehicle classification established; whilst the second option calls for the creation of a separate point-to-point vehicle class.

The third suggestion is the deregulation of point-to-point premiums to allow risk rating, which would mean a point-to-point operator would still require a green slip before registering their vehicle; however they would be free to obtain it from any insurer at any price based on risk.

Option four would see all point-to-point vehicles rated as Class 1, private use vehicles.

The discussion paper calls option five -- the risk pool -- a "novel" solution, which would see taxi networks and rideshare operators required to collect a levy on each fare, with a risk pool created to fund the additional insurance cost for insurers. The paper explains that this would see a drop in green slip cost, with passengers paying the balance of the insurance cost.

The final proposed option, number six, would require ridesharing operators to declare their vehicle usage to the insurer. The discussion paper presents this as retaining current vehicle class arrangements, but freeing up risk factors, which would see taxi and hire cars retaining their own class, and ridesharing vehicles remaining under the regular passenger vehicle umbrella.

Insurers would also be given greater freedom to set prices within each class.

The proposed risk pool option is reminiscent of the government's decision to impose a temporary levy on all point-to-point transport providers, which was the equivalent to AU$1 per trip for a maximum of five years.

At midnight on December 18, 2015, the NSW government gave the green light to ridesharing services, allowing the likes of Uber to operate on the state's roads, coming in second to the Australian Capital Territory as the only states or territories to legalise the service.

The NSW opposition leader Luke Foley introduced a private member's Bill in June to regulate ridesharing services. A month later, the state government launched a taskforce to work with customers, the taxi industry, and hire car companies to probe the state's readiness for the startup.

The taskforce in August called for changes to be made to the current regulatory framework to reduce red tape and level the playing field for the taxi industry and other point-to-point transport services.

More than 5,000 submissions were made to the discussion paper [PDF] that was published in August, with the government saying they played a large part in the decision to legalise the service.

The Review of Compulsory Third Party (CTP) Motor Vehicle Insurance for Point-to-Point Transport Vehicles discussion paper closes for comment on Friday April 8, 2016.