Why is Taxi Insurance So Expensive?

Why is Taxi Insurance So Expensive?

There are a few reasons why taxi insurance is considerably more expensive than traditional social, domestic & pleasure (SD&P) car insurance. Even experienced drivers can feel the pinch of their taxi coverage. A quick Google search online offers forum and blog posts from many drivers for whom taxi work has become unprofitable due to rising insurance costs and lower driving rates.

Firstly, it’s good to understand where the cost of any insurance comes from – risk. Insurers evaluate how likely an incident is to occur and the cost for the insurer of paying out to their customer afterwards. Regular vehicle insurance is cheaper than taxi insurance because insurers believe incidents are either more likely to occur with a taxi or be more expensive when they do.

There’s nothing inherently about taxi driving that makes you likely to cause more expensive damages, nor are taxis more expensive than any other car you’re likely to come across on the road. Therefore, it’s probably fair to conclude that (at least to some degree) insurers believe taxi drivers are more likely to be involved in an incident than a regular driver – so why is this?

Firstly, taxi drivers spend far more time on the road than an average road user. Nearly 50% of taxi drivers report driving over 25,000 miles a year, over 3x the pre-lockdown mileage for an average driver of just over 7,000 miles, according to data from NimbleFins. It’s probably reasonable to assume that spending triple the amount of time behind the wheel might make you more likely to be involved in an accident, even if the additional driving experience doesn’t make you exactly 3x more likely to have an accident. Even regular car insurance is priced based on mileage – the more miles you drive each year, the higher your insurance.

Those additional miles come with risks beyond just the extra distance travelled. Taxi drivers often drive for long hours continuously, regularly venturing into the more unsociable night hours, where exhaustion can kick in. The routes they drive for their customers can also be unfamiliar to them too, which might increase the chances of an accident. Most drivers feel more confident on the road they knew extremely well and will be familiar with risks in the local area like hidden driveways and dangerous traffic patterns. Driving on unfamiliar roads can mean a driver is more likely to be caught out by a road risk.

Finally, a lot of minor incidents can occur while a vehicle is parked. Designated spots in car parks or outside your home can help to reduce the chances of these happening, with clear guidelines for where each vehicle should be. However, taxis don’t always have the luxury of parking in a designated spot. They will regularly stop on the curb to collect passengers from pubs, restaurants or nightclubs, increasing the chances of the vehicle being hit by traffic going past or causing an accident while pulling out into the road.

Cheapest taxi insurance

Finding the cheapest taxi insurance shouldn’t be any more difficult than finding cheap personal vehicle insurance. There are a few things you can do to ensure you get a good deal.

Firstly, don’t take the first price you see. Shop around, perhaps using an aggregator (e.g., comparison site) or broker, and see what prices are available from different insurers (and keep in mind you might find it even cheaper if you shop with them directly!)

Then, like regular vehicle insurance, smaller, less powerful makes and models will always be cheaper to cover than their more powerful counterparts. You’ll also save if you park in a safe spot overnight (garage, drive), drive fewer miles every year and have extra security features on your vehicle.

Taxi insurance average cost

Full-time taxi insurance will probably set you back between £1,300 and £2,000 each year if you’re a typical driver with at least ten years of experience and a good driving record. You may also opt for popular part-time/pay-as-you-go taxi insurance options, which will set you back between £1.50-£3.50 per hour for each hour you work.

Drivers with less experience can pay quite a bit more, as do drivers who’ve had an accident in the recent past.

Picking the more cost-effective policy for you depends on how many hours you work and the amount of risk each insurer believes you carry. Try shopping around a little and running some numbers to see which is the best deal for you. What is cheapest and best for another driver may not be the best for you, as each situation is different.

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