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 adequateinsurance 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 and updated and the insurance
issues are addressed.
Once the insurance issues have been sorted out there really is n o argument against ride sharing except that it will hurt taxi drivers who have paid large sums of money for taxi plates. But nobody guaranteed that this was a wise investment on their part.
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