Offering car rides for a fee? Ensure insurance cover

Motorists who wish to expand the "limitation to use" or the "social, domestic and pleasure" restriction clause are advised to approach insurers to check on their policy's cover and pay an extra premium.
Motorists who wish to expand the "limitation to use" or the "social, domestic and pleasure" restriction clause are advised to approach insurers to check on their policy's cover and pay an extra premium.ST PHOTO: KUA CHEE SIONG

Private car insurance policies limit usage of vehicle to social, domestic, pleasure purposes

Motorists using their vehicles for private car hire services such as UberX have been advised by the General Insurance Association (GIA) to get the necessary motor insurance coverage, to avoid potential financial loss.

Private car insurance policies contain a "limitation to use" condition that restricts usage of the vehicle to "social, domestic and pleasure" purposes.

This means that if the vehicle is used for "hire or reward", such as ferrying passengers for a fee, the insurer is entitled to void the policy on account of breach of warranty, and the policyholder could be denied cover.

In the event of an accident, the insurer will not be liable to pay for damage to the insured vehicle, damage to third-party property, or bodily injury resulting from the accident.

Mr Derek Teo, GIA's executive director, said the association has observed a rising use of passenger vehicles by motor policyholders for "hire and reward", that is, for ferrying passengers in return for a fare.

"While GIA neither supports nor disagrees with the rise of private car hire services, motorists need to be aware that their private car insurance policies have a 'limitation to use' condition, which limits usage to social, domestic and pleasure purposes," said Mr Teo.

Car passengers ferried for a fare are protected under the Motor Vehicle (Third-Party Risks and Compensation) Act, which disallows an insurer from denying compensation to claimants for third-party bodily injury.

It is compulsory in Singapore for motorists to buy insurance cover for the death or bodily injury to third parties, including passengers.

The same Act also allows the insurer to recover the compensation paid to the third party from the policyholder of the vehicle if his plan is limited to social, domestic and pleasure usage.

"As most cases of injury claims tend to be of substantial amounts, a policyholder will suffer heavy financial loss if not covered by an expanded motor insurance policy," cautioned Mr Teo.

Motorists who wish to expand the "limitation to use" or the "social, domestic and pleasure" restriction clause are advised to approach insurers to check on their policy's cover and pay an extra premium.

According to GIA, its member insurers are prepared to expand this limitation to allow the insured vehicle to be used for "hire and reward".

A check with Uber Singapore shows that it is compulsory for Uber drivers to have commercial vehicle insurance. Such insurance is typically issued to cover the use of vehicles relating to businesses. For instance, taxis here are insured under commercial vehicle cover.

A version of this article appeared in the print edition of The Straits Times on October 14, 2015, with the headline 'Offering car rides for a fee? Ensure insurance cover'. Print Edition | Subscribe