South Africa’s minibus taxi industry has gained a reputation for being a difficult business at the best of times. While insiders will agree that insuring the players in this sector is also not without its challenges, these are probably not what you think.
From strikes to violent confrontations to simply their reputation for inducing major road rage in fellow road-users, the minibus taxi industry is certainly not without controversy. Nonetheless, this R16.5 billion industry carries roughly 60 per cent of all South Africa’s daily commuters.
As managing director of Vulindlela Underwriting Managers Dave Gould points out, the industry faces many of the same issues that most motor insurers see every day. “In the end, the taxi industry is motor business in terms of the claims that arise,” he starts.
That said, Rajen Govender, managing director of Mobility Insurance, adds that the taxi insurance market is still not for the ‘faint of heart’, as he puts it. “It is not an easy area of business to get into because the barriers to entry are fairly high. Unless one has an inkling about the industry and all of the risks involved, which are quite divergent, your chances of success are slim,” he starts.
Zane Hassim, marketing director at Claredon Transport Underwriting Managers agrees. “Being a niche market the taxi industry is not only difficult to enter but also an industry that not everyone understands. Over the years, many have entered into the market with no or very little statistical information. They would, therefore, price accordingly in order to gain market share. However, the taxi market is riskier than the norm.”
“Taxis are exposed to risk for at least 16 hours of a day, whereas the normal motorist is exposed for two to three hours. Therefore the claims frequency on taxis are so much higher, not forgetting the severity of claims which escalates due to currency fluctuations and now the deteriorating weather conditions (more hail storms in last two years than in the last 20 years). Eventually entrants realise the above and sometimes apply corrective measures or alternatively they exit the market, leaving customers high and dry,” he says.
“But equally, it is a vibrant area of business with many opportunities. Countrywide the taxi industry transports about 15 million passengers a day. The industry is reported to have around 200 000 vehicles in operation at any given time. We’ve been going for two years, and we’ve grown quite considerably in this space,” he adds.