The emergence of Uber and other ride-sharing services has created increased competition for the Canadian taxi industry. This has created a source of friction for the industry because of what they see is an “uneven playing field.” Taxi operators are required to follow regulatory rules while ride-sharing services largely operate unregulated. The Canadian Competition Bureau recently weighed in on the subject.
The Competition Bureau recently released a study, Modernizing Regulation in The Canadian Taxi Industry, which concluded that the competition in the sector has benefited consumers. However, there needs to be a balance between increased competition and the need for regulation.
The taxi industry has operated largely unchanged for decades. Regulators have created rules to govern price, vehicle safety and insurance requirements. But the regulatory rules often restrict entry into the sector by limiting the number of taxi licences. The number of plates usually does not keep up with demand for services which creates artificial scarcity, but also higher prices, poor service and long wait times.
Ride-sharing companies have changed the landscape by offering consumers lower prices, variable pricing (higher fares when demand is high), shorter wait times, and convenience. The software application used by ride-sharing companies provides automatic payment and the ability to track the number of vehicles available in the local area. The software also allows consumers to rate drivers which creates an incentive to provide better service. Low rated drivers receive fewer ride requests.
The innovations introduced by Uber and other similar service providers have benefited consumers. There is a need for updated regulatory rules so that traditional taxi operators can respond to the competition. But the one aspect not addressed by the Competition Bureau study is the insurance issue.
In September 2015, Intact Financial announced plans to work with Uber to create products tailored for the ride-hailing service, after concerns emerged that person auto insurance policies may not cover drivers using their personal vehicles for commercial gain. In the meantime, Uber claims it has adequate insurance coverage and that every ride on the UberX platform is backed by $5 million of commercial auto insurance, which covers both bodily injuries and property damage stemming from a crash. However, Alberta government said in July that it had determined the policies do not meet the requirements of the province’s Insurance Act. It’s all very confusing.
Ride-sharing services are here to stay. Consumers will benefit but only if the regulatory rules are updated and the insurance issues are addressed.