Taxify threatens to end ridesharing in Estonia

Photo: Eero Vabamägi

Estonia has heeded complaints by several interest groups and wants to hold ridesharing platforms Taxify, Uber and Yandex accountable for their drivers having stellar backgrounds, vehicles in good repair and tidy insurance payments.

“One possible consequence is the killing off of a necessary and innovative mode of transport accompanied by considerable social side-effects. In its current form, the amendment could lead to the disappearance of hobby drivers and semi-professional taxi drivers from the Estonian transport market,” Taxify co-founder Markus Villig writes in a letter to Minister of Economic Affairs and Infrastructure Kadri Simson.

Taxify finds that if the state goes ahead with the plan, ridesharing platforms could only mediate “classic taxis”, which would translate into an inglorious end for the ridesharing era in Estonia.

Taxify and Uber have maintained from the first that they are intermediaries and only responsible for quality IT services – applications.

Until now, all obligations have been placed on the shoulders of drivers – they need a taxi license, license card, service provider card and are expected to handle insurance payments, pay taxes and take care of clients.

While the system has seemingly been successful, several problems have cropped up. The main reason is Taxify’s reluctance to give out information on its drivers, despite the company being very open in words. This has led to a situation where the tax board lacks any kind of tools for making sure drivers pay taxes. The state has also not managed to create a system to make sure taxi services are not offered by hardened criminals or to check the conditions of vehicles used to offer services.

Problems with insurance

Additionally, insurance companies have no idea whether vehicles are used only for private trips or also for business purposes. The latest redaction of the public transport act would turn things back to the way they were. It would classify ridesharing platforms as taxi operators who are expected to take responsibility for their drivers.

“It will be unequivocally clear in the future that taxi operators must ensure all necessary licenses for the service have been acquired,” the ministry’s press representative Rasmus Ruuda said.

But Taxify’s main concern lies elsewhere; namely with insurance. Taxify and Uber would be expected to share the driver’s license card number with the client and the register of economic activity (MTR). This would make sure no ridesharing driver could work without a license card that serves a proof their vehicle is fit for service.

Because insurance providers have access to the MTR, ridesharing drivers could no longer avoid very high motor third party liability insurance payments for taxis. This latter change is what has upset the bosses at Taxify as insurance payments several times higher than what they currently pay would take away the motivation of so-called Sunday taxis.

Annual TPL insurance payments for taxis have been up to €1,000 euros more expensive compared to private vehicles. A company that operates electric vehicles as taxis recently moved away from Tallinn for that very reason. Here are some examples given by Taxify: if TPL insurance for a privately used 2017 Volkswagen Golf is €152-250, insurance for a similar taxi would be €1,342-5,375. Normal insurance of a 2014 Skoda Octavia is €55-160, while it would be €502-2,936 for a taxi.

Prices would fall

Insurance companies claim that sharing information with them would finally given them the chance to realistically look at how often privately owned vehicles are used for offering taxi services and lower insurance payments for taxis that do not offer the service on a daily basis. The amendment would do away with the current black and white system where vehicles either are or aren’t taxis.

“Insurance providers have repeatedly offered to cooperate with Taxify to have dynamic pricing and work out a fair price based on statistics. Negotiations have always ended there as we have been told their conditions do not allow for that. By today, we have realized that there is no desire to cooperate on the other side, and that efforts are made to retain today’s muddy regulatory situation. Taxify’s attitude is hypocritical and cynical,” said chairman of the Estonian Motor Insurance Bureau Mart Jesse.