What LGAs in Australia need to know about Insurance for Micromobility
Today I participated in an engaging insurance panel hosted by Beam Mobility in Melbourne, Australia. We discussed some great insurance issues, issues which I thought would have wide interest amongst the Australian micromobility community and in particular councils.
Any LGA in Australia preparing their active transport and shared mobility strategy should make themselves aware of the risks as well as the insurance types which may be available to mitigate those risks.
Here are the questions we discussed and some more detailed responses.
What do you see as the role of insurance in micromobility and as risk allocation generally??
The role of insurance plays in micromobility, for devices such as electric scooters, bicycles, or other small modes of transportation, is crucial for risk allocation and protection for both the Operator and the rider.
Here are some key aspects of the role insurance plays in micromobility and risk allocation generally:
Rider Protection
Insurance provides financial protection to riders in the event of accidents, injuries, or damage to property while using micromobility services. It helps cover medical expenses, liability claims, and property damage, ensuring that individuals are not personally burdened with the full cost of accidents or incidents.
Operator Protection
Insurance plays a vital role in protecting micromobility Operators from potential legal claims and financial liabilities resulting from accidents or injuries. By having appropriate insurance coverage, Operators can mitigate the risks associated with operating these services and protect their business interests as well as those of the council.
Risk Allocation
Insurance facilitates risk allocation by transferring the financial burden of potential losses from individual users or service providers to the insurance company. It ensures that the costs associated with accidents, damages, or liabilities are spread across a larger pool of insured individuals or organisations, thereby reducing the impact on any single party.
Regulatory or Licence/Permit Compliance
Insurance is often a regulatory requirement for micromobility Operators. Governments and local authorities usually mandate insurance coverage as a prerequisite for operating these services, ensuring that adequate protection is in place for users and third parties affected by accidents or incidents.
Market Confidence
Insurance coverage in micromobility enhances market confidence and supports the adoption of these services. Riders are more likely to engage in micromobility if they know that their risks are covered by insurance, promoting a sense of security and trust in the service.
Product Innovation
The evolving micromobility landscape presents new challenges and risks that require innovative insurance solutions. Insurance companies have developed specialised products tailored to the unique needs of micromobility services, such as pay-per-ride/per-minute coverage or fleet-based insurance policies, fostering innovation in the insurance industry.
Overall, insurance in micromobility serves as a risk management tool, providing financial protection, allocating risks, ensuring compliance, and promoting the growth and sustainability of these emerging transportation modes and the industry as a whole.
What are the current insurance offerings in shared micromobility? Can you explain what each of the policy covers??
Australia has the most onerous insurance requirements for micromobility Operators globally. Operators are required to hold extremely high levels of insurance, making it a very expensive market for them to operate in.
Insurance Types Required
There are five key risks cities may be exposed to when offering licences/permits to share operators:
In order to manage the risks associated with micromobility, four types of insurance are available to remedy these risks.
Public Liability Insurance to cover operator negligence
Public Liability Insurance up to $20 million
Australia has the highest requirements for Public Liability Insurance anywhere in the world. This type of insurance is exceptionally expensive, with premiums starting in the hundreds of thousands of dollars for free-floating schemes.
Product Liability Insurance to cover incidents arising from faulty devices, batteries and associated chargers etc
Most LGA permits/licences in Australia do not require operators to hold Product Liability Insurance. Given the risk of fires associated with e-devices, it is prudent to ask Operators to hold appropriate levels of Product Liability Insurance. It is a policy type that is becoming increasingly difficult to insure in Australia.
Rider Third Party Insurance covers riders who injure another or their property
This type of insurance is usually available where the rider is riding in accordance with the operator’s terms and conditions and the laws of the land.
Insurers currently offer up to $1 million Third Party Insurance. There are two types of policies available in Australia at the time of writing:
We have seen some operator’s policies with a rider excess, i.e. the first $5,000 of every claim is payable by the rider. This is difficult to manage and often results in bad PR for the operator who enforces it.?
The critical issue faced by all operators and insurers is how to handle claims by third parties where the rider was in breach of the operator's terms and conditions and/or the laws of the land. Insurers are applying creative ways to solve this, sometimes by providing lower limits to these types of claims as well as writing “claw back” language into the policy wording, i.e. the insurer has the right to seek recompense from the rider. In practice, this rarely happens, so the underwriter has to price this risk into their insurance program.
Rider Personal Accident Insurance - insurance to cover the rider in the event they have an incident causing them personal injury
This insurance is not available/payable (the insurer excludes incidents) where the rider was in breach of the terms and conditions of the operator or did not adhere to the laws of the land.
The usual level of insurance held by operators in Australia is $50,000 Death and Disability Insurance plus up to $500 per week salary continuance/income continuance payable for up to 26 weeks (typically a 14-day wait applies). We have seen one insurer offer $75,000 Death and Disability Insurance. These policies also offer additional payouts for, amongst other things, expenses related to broken bones and chipped teeth.
No insurance for toppling incidents
Rider Third Party Insurance programs currently available in Australia only cover incidents where there is an active ride. The insurer covers the rider, not the device.
The insurance is specifically available for the benefit of the rider. Insurers do not extend their insurance to cover topple/tip-over incidents when the scooter is not rented.
If it is a valid incident, the operator may choose to resolve it by making an exgratia payment to the third party.
The more challenging issue to address is where a device was left as a trip hazard, and a third party injures themselves as a consequence. Under this scenario, the operator can lean on their Public Liability Insurance. These claims are usually subject to litigation unless the operator/insurer settles out of court.
How has this evolved over the past few years??
With improved data, and driven by competitor pressures between operators in Australia, policies have evolved considerably over the past few years.? As an industry, we started out requiring operators to hold $20 mill public liability insurance. Very quickly some operators responded by proactively offering personal accident insurance, followed by rider liability insurance. Policy wording and coverage have also improved as insurers become more comfortable with pricing these risks.?
How does this compare to insurance for cyclists? Cars??
The insurance requirements for cars are quite different as cars are registered vehicles and insurance is compulsory.?
Around Australia, Compulsory Third Party insurance is biassed towards registered motorised forms of transport such as cars, trucks, motorbikes and public transport and does not respond to active transport except where the incident involves a registered vehicle.
Bicycles, e-bikes and e-scooters are neither registered nor registrable vehicles under the Victorian TAC. They are not recognised and are not eligible for insurance unless the incident involves a registered vehicle.
People who own their own e-bikes can purchase rider liability insurance and personal accident insurance and asset insurance. At the time of writing (July 2023), these policies are currently not available for e-scooter riders as insurers are not willing to provide the product because they have insufficient data to price the risk and they would prefer a large insurance pool, preferably created by a compulsory insurance requirement.?
Most cyclists carry no insurance.
From a council’s perspective, what is your view of these insurance products and how it relates to a council’s risks??
Some hypotheticals:
Answering these hypothetical questions is tricky as the responses depend on so many factors. Please take these responses as guidance rather than gospel :) The answers also depend on the individual policy wording and not all policies are the same and not all policies offer the same coverage.
It's important to note there is no compulsory insurance requirement for micromobility in Australia.? Unlike some other markets around the world, nowhere in Australia is there a compulsory requirement to hold any insurance.
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Insurers willing to insure e-scooters and e-bikes in Australia have responded to market needs and competitive forces and it has been governed by insurers' appetite to cover the risk and Operator's willingness to pay high premiums.
As a rule, insurers do not insure illegal activities. There is currently no such thing as 'no-fault' insurance in Australia for micromobility.
Hypothetical - If there was a defect in the vehicle fleet. e.g. The vehicle caused sudden braking which threw the rider off, injuring the rider and/or third parties?
Often these risks sit between different underwriters i.e. each type of insurance has a different insurer and a number of policies may respond to one given incident.
Under Australian law, any importer is responsible for the quality of the device as if they are the manufacturer.? It's important for Operators to hold Product Liability Insurance.? The Operator may require their manufacturer to also hold product liability insurance; however with most e-devices being manufactured in China, there are poor rights of recourse. This means the Operator is technically on the hook for any faults with the device.
Responding insurance to a defect in the fleet vehicle - Product Liability and possibly Public Liability depending on where the negligence resides.? Would most likely require litigation but not always.?
Rider Third Party Insurance may also respond however they would look to see where the responsibility resides i.e. was the device or the Operator negligent?
Personal Accident Insurance would respond and pay to the limits offered under the terms of the policy, on the submission of medical evidence etc.
Hypothetical - If there was no issue with the vehicle but an escooter rider injures themselves
Through a pure accident?
Personal Accident Responds to the limits set out under the policy.
Due to them riding negligently?
No insurance is available to riders who ride in contravention of road rules or the terms and conditions of the operator.
Hypothetical - If a shared e-scooter rider was riding negligently, bumping into a third party causing injury to the third party?
If the accident occurred because the rider was breaking the law, eg. by riding on the footpath?
If the accident occurred because the rider was intoxicated?
Typically when a rider is in breach of the terms and conditions of the Operator or the laws of the land, insurance is not available to them.? This has given rise to some creative policy development.
Insurers and Operators do not want to be seen to be condoning illegal behaviour - it sends a very bad signal to the market.? There are however some pragmatic and commercial issues that are driving creative policy responses.??
Councils are wanting innocent people protected from riders who behave badly and Operators are keen to win more permits to operate. Permits, that will not be issued unless there is a satisfactory solution to managing this risk.
In response, insurers have crafted reimbursement clauses that allow the insurer to pay the victim of the incident and pursue the rider for reimbursement.? In practice, riders rarely reimburse the insurer.? The premiums for this feature are more expensive and reflect the additional risk the insurer takes on, knowing they are in all likelihood not going to be reimbursed for the payout.
Whilst this issue has received a rather significant amount of attention, these claims make up a tiny proportion of all known claims.
Hypothetical - If a cyclist was riding erratically and swerving in and out of traffic, bumping into a shared e-scooter rider causing injury to cyclist and the e-scooter rider
In the event a private cyclist was riding erratically and bumped into an e-scooter rider, the e-scooter rider would be covered under the Rider Personal Accident Policy offered by the Operator.? If their injuries were severe they may choose to sue the cyclist. With no compulsory insurance requirement in Australia for cyclists, it is highly unlikely the cyclist is insured.?
Hypothetical - If in any of the above situations, the injured party also takes legal action against the council for allowing shared micromobility in the LGA.??
It is every citizen's prerogative to pursue any and all avenues to get the outcome they are seeking. Whether they will be successful will come down to a number of issues.? It's not straightforward.?
We know some councils have taken legal advice about the structure of their programs i.e. licence or permit. Some legal advisers have recommended councils have permit programs as opposed to licences and ensure the program is not viewed as an extension of council or a JV of sorts. This is a potential issue as councils usually generate fees from permitting the Operators to use their land for the provision of the service. This is an issue for each council to explore with their legal teams.
With respect to Public Liability Insurance, we suggest councils ask to be an additional insured or interested party.? ?This means the policy would respond in the event the council was brought in on a claim where the Operator was allegedly negligent in their operations and this negligence led to a loss.
Some councils have asked Operators to have the council as a named insured and this is something that is not feasible as:
Victorian Regulatory Changes in April 2023
The state of Victoria made the riding of e-scooters legal in April 2023.? The legislation also permitted any Victorian LGA to implement shared electric scooters. The State legislation determined:
Electric scooter riders cannot:
Full details are at:https://www.vicroads.vic.gov.au/safety-and-road-rules/e-scooters-in-victoria
LGAs can determine their own local rules within this overall framework including:
Victoria is currently doing a 6-month review of the rules for shared and privately-owned electric scooters and other ePMDs.? We expect there will be some fine tuning in September/October 2023.
In micromobility, does insurance equate to safety and low risk?
Insurance does not directly equate to safety or low risk. While insurance can provide financial protection in the event of accidents or incidents, it does not inherently guarantee safety or eliminate risk. This is true for any mode of transportation.
Insurance acts as a risk management tool by transferring the financial burden of potential losses from individuals or organisations to an insurance company. It helps mitigate the financial impact of unforeseen events and provides a safety net in terms of financial liability. However, insurance does not address the underlying causes of accidents or eliminate the risks associated with certain activities or operations.
Safety and risk reduction involve a combination of factors, including proper training, adherence to safety protocols, the generation/model of the device being ridden, maintenance of equipment, implementation of safety features, and responsible behaviour by individuals. These factors are critical in preventing accidents, minimising risks, and promoting overall safety.
Insurance companies assess risks when determining premiums, and safer activities, territories or operations may result in lower insurance costs. However, insurance alone cannot guarantee safety or eliminate risk. It is essential for individuals and organisations to prioritise safety measures and risk management strategies to minimise potential hazards and create a safer environment.
Ultimately, a comprehensive approach that combines insurance coverage, risk management practices, and a commitment to safety is necessary to promote both financial protection and actual safety in various contexts.
Krystyna Weston is Co-Founder of Zipidi along with Stephen Coulter . Zipidi is a micromobility consultancy and service provider. Our worldwide expertise extends to working with cities, operators, regulators, manufacturers, communities and retailers.
With a comprehensive understanding of the micromobility landscape, including insurance, we are well-equipped to support your city in navigating the complexities of implementing private and share e-scooter and e-bike programs.
By collaborating with Zipidi, cities can benefit from our unparalleled industry knowledge, strategic guidance, and practical expertise. With Zipidi's guidance, cities can confidently address the challenges associated with integrating micromobility options into their transportation systems while ensuring the highest level of safety, convenience, and sustainability.
You can email Krystyna at [email protected]
Localift Services Pty Limited, trading as Zipidi ABN 14 602 092 268 is a Corporate Authorised Representative (ASIC AR No. 001295079) of Insurance Service Holdings Pty Ltd ABN 66 632 993 214, AFSL 491165
The information provided here is general advice only and has been prepared without taking into account your objectives, financial situation or needs. Before you buy a policy, you should consider if the product suits your needs by reading the Policy Wording, in light of your personal circumstances.