Celebrating 20 successful years: Taming the taxi insurance industry

In 1991, providing comprehensive motor insurance for taxis in South Africa seemed an impossible vision. Now, 20 years later, CTU insures more than 85% of insured taxis in the country, generating in excess of half a billion Rand in premium income. Louis Fi

“I joined CTU from a company called Hollandia Reinsurance, today known as Hannover Re. Being a conservative underwriter, I was stunned by the idea of underwriting taxis given the high risk involved,” says Fivaz.

“I was tasked to look into and improve the performance of the company. At the time, CTU generated an annual premium income of R700 000 per annum and things were not going too well.

It was a considerable challenge, but one that proved irresistible to my entrepreneurial spirit, particularly in light of the shareholders’ offer of a share incentive at the time. With the dedication and loyalty of a great team, we turned CTU into one of South Africa’s most remarkable insurance success stories. It certainly has been one of my most significant achievements to be part of the phenomenal growth we have experienced in an intricate industry where mere survival is an achievement – over the years, many competitors have found it impossible to manage the loss ratios.”

Success sustained

Today, as CTU celebrates 20 successful years in the taxi insurance industry, the company insures 60 000 policyholders - an estimated 90% of the insured taxi market.

More than 80 000 taxis are insured on a comprehensive basis, with a further 20 000 taxis covered through other insurance products, such as passenger liability. And there is room for growth in this unique market: while some competitors do exist, CTU estimates that around 80 000 taxis in South Africa remain uninsured.

Tackling unique challenges

Insuring this unique segment of the market brought some unique challenges. “This is certainly an industry that is extremely difficult to underwrite due to high risk, which is a result of both the unidentified registered drivers and the fact that the vehicles are exposed to risk at least 12 hours a day,” explains Fivaz. “In addition, some taxis are very old and since a taxi covers an average of about
80 000km per annum, there are some vehicles that have already done up to 700 000km.”

“Taxi drivers also change on a regular basis and since we don’t have the luxury of the drivers’ details, it is nearly impossible to underwrite individual drivers. In the past, some competitors have tried to insure taxis on a named-driver basis and many claims were repudiated. We do, however, conduct a risk assessment on each taxi before it is placed on risk, including an inspection to ensure no previous damage exists.”It has also been quite a challenge to train the taxi owners, especially with regard to the various taxi products and timely payment of premiums. “Although there has been a significant improvement, this is a continuing process,” adds Fivaz.

Unique solutions

Based on a thorough understanding of the market and the unique challenges it poses, CTU has created a product that not only satisfies the needs of the taxi industry, but is also priced correctly.

There are three insurance products: Zimele, Matla and Supersaver. All three options provide comprehensive insurance, but features different excess amounts. The cover includes damages sustained through taxi accidents, theft and hijacking, windscreen damage and damage sustained due to riots or strikes, as well as third party liability. Passenger liability is offered as an optional extension on these products.

Harnessing technology

All taxis insured with CTU have Data Dot installed. “When Data Dot was initially launched in the South African market, it faced many difficulties due to the red tape,” notes Fivaz. “I stepped in, cut away all the red tape and initiated that all our insured taxis are fitted with this technology. CTU was the first company to utilise this technology as a deterrent against vehicle theft and to assist in the recovery of stolen vehicles.”

It’s all about relationships

In this market, comments Fivaz, it’s all about relationships. “Relationships are the crucial success factor in this market – relationships with our clients, with the various leaders in the industry, with our brokers and with our shareholders.

“We are in contact with the taxi owners and taxi associations on a regular basis and attend all their functions. I am always humbled at how well I am received and how appreciative the taxi operators are, or our attendance at these functions.

Working with brokers

The importance of relationships is even more pronounced in CTU’s broker network, which currently encompasses 500 selected short-term insurance brokers nationwide. “I have particularly enjoyed building our broker network over the years,” says Fivaz.

“In areas in which we did not have a broker, we identified possible candidates from previously disadvantaged backgrounds and helped them establish their own businesses. It has been a great privilege to witness their growth and accomplishments.”

Essential partnerships

Hollard Insurance Company Ltd, the short-term insurer in the Hollard Group of Companies, is a significant shareholder of CTU. Lireas Holdings (Pty) Ltd, a South African company and a subsidiary of Hannover Reinsurance Africa Ltd, is a 38% shareholder. “We are proudly associated with these companies,” says Fivaz. “Our relationship with Hollard works well, as they respect our independence and also encourage entrepreneurship. Hannover Reinsurance Africa is, of course, the largest reinsurer on the African continent and the third largest worldwide, which provides exceptional stability and outstanding global expertise.”

Into the next decade

Fivaz believes that CTU is well-positioned to sustain the success it has achieved over the last 20 years and to build on this solid foundation as we move into a new decade. “Many of the original challenges remain, in particular the high claim frequencies and the industry sensitivity to premium hikes due to economic factors. To balance these two factors, along with the loss ratio, remains our greatest challenge. But with a highly experienced team, who are experts in all matters relating to the operations of minibus taxis, we will continue to tame the once ‘uninsurable’ taxi market and underwrite this unique risk on a profitable basis.”