Fuel and Insurance price rises putting the squeeze on Taxi Drivers – is there any solution?
Any self employed taxi driver or larger Taxi company will tell you that the rapid rise in fuel prices and rising insurance costs are making serious dents in the profitability of driving taxis for a living.
Taking these in turn, what can taxi drivers and taxi companies implement to minimise these costs in the current harsh economic climate?
Covering fuel prices, the short answer is “not a lot!” The price per barrel of crude oil remains at all time high, and this graph shows the average price rise over the last decade. Whilst oil companies remain hugely profitable and pass price increases onto the end user, and the government increases tax within the price you pay at the pumps, the end result is fuel prices at an all time high over the last couple of years.
So what can you do? Well, on a macro scale you can continue to petition against the fuel price rises by lobbying the government (and oil companies) by adding your name to the numerous petitions like this example http://www.fuelprotest.com/.
In may seem insignificant, but perhaps the sheer volume of protest has in some form influenced the government to act in freezing fuel duty in yesterday’s budget (rather than the planned rise) and seen a further tax levy on oil companies instead.
The second step I’m sure many people have already implemented is a review of your actual taxi(s). The vast majority will be oil burning diesel power plants and therefore much more fuel efficient. But could you do better? If you have an older vehicle, modern engines have taken further steps in efficiency so for a high mileage driver, a modern engine may give further MPG savings to offset (or better) the cost of upgrading your vehicle. Especially if you are on a monthly lease plan.
Another question to ask yourself relates to engine size and/or vehicle size? Do you really need the bigger vehicle / engine you are currently running? If the answer is “yes” then you’re pretty much stuck but do consider downsizing engine capacity if you can, especially given the mpg and perhaps road tax savings a smaller engine capacity vehicle could bring.
The advancements in torque for diesel engines mean a downgrade in engine size doesn’t mean a downgrade in performance.
To sum up, there are some small changes that you can implement on the micro level but being blunt these are more likely to save you a few hundred rather than a few thousand pounds per vehicle (unless your car is really thirsty!) Although for high mileage drivers these fuel savings could make a significant difference.
On a macro level we all need a reduction in the price of crude oil – which looks unlikely until the civil unrest dies down in several oil produces countries – and perhaps some further tax support from the Treasury to solve that issue. We’ll wait and see.
So moving onto insurance, what can you do to reduce your insurance costs? As someone that works in the insurance industry, let me first paint the bigger picture and try and sum up why insurance costs have risen 25% (as a rough average) in the last year.
Insurance underwriters haven’t been making money on motor insurance. In previous years this wasn’t too much of an problem as the premiums they received were invested elsewhere (banks when interest rates were higher, stocks, shares etc) and they enjoyed high returns. So profitability from actual underwriting wasn’t so much of an issue and they were more concerned with writing business volume at a competitive rate so they had a higher ratio of premiums to invest.
But the world has changed – interest rates are at a low level not seen for a generation and other investment markets are either low return or high risk. So as a rule of thumb, insurers are not making money from investing. So now their actual insurance profit/loss ratios are massively important to them, and they have to ensure that their insurance underwriting is actually profitable.
Added to this pressure is the likely increase in fraudulent insurance claims in times of recession. Fake accident scams, and dodgy insurance claims all put pressure on premiums across the board.
So these two things combined briefly explain why insurers have hiked prices so rapidly – to get a return to profitability.
So how can you buck the trend on these increasing taxi insurance prices?
My biggest tip would be to use a specialist taxi insurance broker. Working for insureTAXI I would say this(!) but there are concrete reasons behind this.
First of all, it comes down to relationships. A taxi specialist such as ourselves will have access to a wide variety of taxi underwriters, thus covering most or all of the available market.
Secondly, we’ll know who is hungrier for business at any given time and thus who will be offering keener rates. This is not a broad brush approach either. Certain insurers will prefer certain risks, whether it is down to postcode, vehicle type, licencing authority, no claims or number of seats – and these fluctuate!
But perhaps the biggest aspect to this is the relationship we hold with our underwriters. Like most service industries, you can extract keen rates for new business by speaking to the right team of people. Likewise, you can get attractive renewal prices if you ask nicely and claims are low! You can also negotiate quite hard on taxi fleet rates (so for 3+ vehicles on a single policy).
Simply put, the general trend is that insurance rates are on the rise and there is no getting away from that.
However, there are opportunities for a specialist like insureTAXI to shop around on your behalf using our knowledge gained daily in the industry. Insurance underwriters still want new business or indeed to retain renewals and ultimately to make money.
No customers means no revenue, so there are deals to be struck. It’s about knowing who to go to at any given time and having a solid relationship in place. Our customer base has a good track record in terms of lower than average claims versus the industry standard, and this generally goes in our customers (new or existing) favour.
We can also use no claims bonus from private car or other professional driving experience (e.g. courier, haulage)
Of course, the ultimate price will depend on your driving and claims history!
For a cheap taxi insurance quote visit our website or call us on 0800 142 2828.