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How are taxi premiums calculated?

The way taxi premiums are calculated has changed from 1 April 2018.

Taxis can currently choose to pay either a fixed annual premium or opt in for installment payments.

Installment payments are based on forecast kilometres travelled that are subsequently adjusted based on actual kilometres. Whereas the fixed annual premium is based on average annual kilometres for taxis.

Having a usage based calculation of Green Slips for taxis is fairer when setting premium prices across all point-to-point services.

We have built a new online tool that can help you determine which option would work best for you.

Use our CTP options for taxis tool

In 2019, the way insurers calculate and collect CTP premiums for taxis will change.

The changes will see taxi CTP premiums calculated on the same basis as other comparable point to point hire vehicles, such as rideshare. this means that no premium cap will apply to either taxi or hire vehicle CTP premiums, with premiums calculated on the basis of fare paying kilometres travelled. this change to CTP premium calculation is anticipated to commence during the first half of 2019 to allow time for taxi operators to install fare-tracking technology.

Payment options

Fixed annual premium

Taxis are a Class 7 for setting of premiums.

The average annual premium for a taxi in the metro area (T plate) from 1 July 2018 is around $5,970 and in country areas (TC plate) is around $3,210.

The premium includes:

  • base premium
  • cents-per-kilometre (based on average kilometres travelled in a year):
    • 5 cents x 107,000 km per year to T plates
    • 3.3 cents x 85,000 km per year for TC plates
  • Class 7 Fund levy:
    • $142 for T plates
    • $110 for TC plates
  • Input tax credit (ITC) loading of 7%
  • GST of 10%.

† Variable by insurers

Instalment payments for T plates

Taxis with T plates that opt in to pay their premium in installments can reduce their total premium if they travel less than 107,000 km a year.

There is an upfront premium payment, followed by two installments four months apart. At the end of each installment period, there is an adjustment of actual kilometres travelled compared to the pre-paid kilometres.

The upfront payment is one-third of the fixed annual premium. The upfront payment comprises a deposit premium, the total Fund levy, GST and pre-pays for around 22,600 km.

The second and third installments each pre-pay for around 42,200 km.

Any adjustments to the previous instalment based on actual kilometres travelled are either credited or added to the next instalment.

The Fund levy, GST and tax input credit are inclusive.

The metro taxi illustration shows how a taxi that travels 90,000km over a year can save by opting in to pay in instalments.

Instalment payments for TC plates

Taxis with TC plates that opt in to pay their policies in instalments can reduce their premium if they travel less than 85,000 km a year.

There is an upfront premium payment, followed by an installment six months later. At the end of each installment period there is an adjustment of actual kilometres travelled compared to the pre-paid kilometres.

The upfront premium payment is half of the fixed annual premium and pre-pays for 27,000 km.

The second instalment pays for 58,000 km.

Any adjustment to the previous instalment based on the actual kilometres travelled are either credited or added to the next instalment.

The Fund levy for taxis, GST and tax input credit are inclusive.

The country taxi illustration shows how a taxi that travels 80,000km over a year can save by opting in to pay in instalments.

Class 7 Fund levy for taxis

The Fund levy is a flat fee paid by all CTP policy holders based on the class of vehicle and location where the vehicle is garaged. It pays for ambulance and hospital admittance, the Lifetime Care and Support scheme for the severely injured and for long term medical and treatment costs for people with serious injuries. It also pays for SIRA’s administration of the CTP scheme.

The Fund levy for taxis is a Class 7 which is equal to Class 1 from 1 July 2018.

How do taxi premiums compare to ride share?

Ride sharing companies have the technology that enables them to readily identify when the vehicle is being used for ride sharing purposes only and how many fare paying kilometres are travelled.

Taxis have a combination of booked fares and ‘rank and hail’ fares and at this point in time they cannot efficiently distinguish between all kilometres travelled and fare paying kilometres.

Ride sharing vehicle owners pay a Class 1 premium like other passenger vehicles but they also pay a 10 cents-per-kilometre CTP component for fare paying kilometres travelled or 6.6 cents per kilometre if the journey started in a country region.

Taxis also pay cents-per-kilometre for CTP but this is for all kilometres travelled. This includes the kilometres travelled between fares and while driving around looking for passengers.

Taxis therefore pay a lower cents-per-kilometre than ride share – 5 cents for metro taxis and 3.3 cents for country taxis.

The above arrangements have been in place since April 2018.

Introducing the cents-per-kilometre premiums for ride share and taxis is a step towards a fairer setting of premiums across all point-to-point services.

In 2019, the way taxi CTP premiums are calculated will change to be on the same basis as other comparable point to point hire vehicles, such as rideshare.  This means that no premium cap will apply to either taxi or hire vehicle CTP premiums, with premiums calculated on the basis of fare paying kilometres travelled. This change to CTP premium calculation is anticipated to commence during the first half of 2019 to allow time for taxi operators to install fare-tracking technology.