Regulators must be mindful of the insurance implications if ride-sharing services such as Uber are legalised, the Insurance Council of Australia (ICA) has told the NSW Government.

ICA says it is for state and territory governments “in consultation with interested parties” to determine the legality of such services, but insurance has a critical role to play once that occurs.

“General insurance can offer protection for those involved in new business models that offer services via ‘shared economy’ platforms,” ICA told the Point to Point Transport Taskforce, which is examining the emergence of the ride-sharing industry.

“However, personal insurance policies for home or motor insurance typically do not cover activities of a commercial nature.

“If a ride-share driver sustains damage to his or her vehicle in an accident, or causes damage to other property while providing a ride-share service, a personal motor insurance policy may not cover the cost of this damage.”

ICA says as regulatory certainty for new services increases, it is likely competitive market forces will respond to the commercial insurance needs of ride-share drivers.

In the meantime, it places the onus on consumers.

“A consumer using a personal vehicle for commercial purposes should… clarify with their insurer whether they are covered for motor vehicle property damage (comprehensive or third-party property) sustained during the commercial activity.”

ICA supports a minimum level of coverage for third-party property insurance, because of the higher risk of motor accidents among point-to-point transport services.

“This ensures not-at-fault motorists can successfully claim compensation for property damage, and it can prevent situations where passenger transport service providers could sustain large personal losses if directly sued for compensation for property damage caused.”

In relation to compulsory third party (CTP) insurance, ICA says scheme funding is the key issue: “Premiums must be sufficient to meet the cost of claims.”

ICA’s recent submission to the ACT Taxi Industry Innovation Review made an alternative suggestion for CTP vehicle classification, which the council also wants the NSW taskforce to consider.

“Ride-sharing vehicles [should] be separately classified, so that at registration vehicle owners who intend to provide ride-sharing services are required to register their vehicle on this basis and pay the relevant CTP premium for the ride-sharing vehicle class.”

ICA believes ride-sharing operators should require proof of this registration from drivers.

The separate classification would ensure providers of ride-share services pay a CTP premium appropriate for the related risk.

“If claims data over a relevant period of time demonstrates ride-sharing services do attract a higher claims frequency, this would avoid the potential cross-subsidisation for providers of ride-share services by other classes of lower-risk vehicles in the scheme, such as private use-only vehicles.”