Car insurance and Uber in Hong Kong

Before we look into the legality and insurance-related concerns surrounding car-hailing apps like Uber, it would be beneficial to discuss the current situation and actions that have led to all of this confusion.

As we noted above, Uber has been in operation since mid-2014 in Hong Kong and has pretty much been under the microscope since day one. In mid-2015, the Hong Kong Police raided Uber's office, seized computers and arrested five drivers in a sting operation. Two more drivers were arrested the following day.

According to the HKFP, "Traffic chief inspector Bruce Hung Hin-kau said that the arrested drivers, aged 28 to 65, were charged with carrying passengers illegally for reward and not having third party risks insurance." In late January 2016, the first two drivers were officially charged by the Kowloon City Magistrates’ Court, with the other five drivers awaiting a precedent-setting trial which is set to take place on February 24th.

This can be a confusing topic as the service is so new that the government has not actually committed one way or another with regards to the legal status of companies like Uber. In short, the company itself is a legal entity and, therefore, is legally allowed to run a business in the city. The service Uber offers, however, falls into a bit of a grey area.

Here in Hong Kong, any person or company looking to offer a "private car-for-hire" service must have a licence from the government. In the case of the drivers who have been fined, and the pending court cases of the other drivers, they were found to not have the correct permit, and therefore, were operating illegally.

If a driver has secured a hire car permit (there are four types of permit available from the Transport Department, with the ones for limousines or private cars being the most relevant for Uber drivers) and decides to work for Uber, it is legal.

Ken Chung, Kwiksure's Motor Manager, further explained the situation, "While it is legal for drivers with permits to work with Uber and other hire-car services as long as they also have adequate insurance, not every driver will have the permit. This means that with the current legal landscape of Hong Kong you are taking a risk when you use the service."

The other major reason the drivers were arrested last year revolves around car insurance. In Hong Kong, car insurance can be divided into two different categories:

• For private cars
• For commercial vehicles

Both categories of insurance require that drivers acquire, at the very least, third-party coverage - any cars on the road without this type of coverage will be considered illegal with drivers facing stiff fines. The issue here, however, is that third-party insurance for private cars does not cover commercial use. What we mean by this is that if you have your own car and start to offer rides to people for money, any damage from accidents you are in will not be covered by your insurance.

Chung further explained, "If you get in an Uber car that does not have the proper permit (permission to operate commercially) you are not going to be covered by the driver's insurance, as private car insurance plans have a stipulation that explicitly prohibits using the car for commercial purposes. Therefore, any damages or claims for or against you would not be covered by the driver's insurance, leaving you with no compensation."  

To avoid this situation, Chung suggested, "We are not telling clients to avoid Uber, and in fact fully believe that the service is here to stay in the city. The government should review the related ordinances and develop the industry in a way that incorporates ride-hailing companies while also increases taxi services."

With Uber here to stay, for at least the time being, Kwiksure has noticed an increase in enquiries from clients who are considering becoming an Uber driver. As we noted above, you are required to secure a hire car permit and then third-party insurance in order to operate within legal bounds.

Chung explained a common situation that has been asked about by clients, "In recent months we have had a number of clients who want to become Uber drivers contact us wondering if it is legal if they don't receive any payment or reward directly from the passenger, instead receive payment from a third party."

He continued, "In truth, there is actually no established precedence around this situation, and there isn't likely to be one until the February 24th court case. Due to this, there is still a high risk that any actions, like offering rides with no cash changing hands directly, will be deemed as a breach of insurance terms. Any claims will be denied and you could be held criminally liable, leaving you open to lawsuits. In short, we don't recommend this strategy for the time being. It is just too risky."

Beyond risk, Kwiksure can not legally insure a personal car if the driver wants to use it for commercial purposes without the correct permits from the Transportation Department. In order to secure this type of insurance and avoid what the seven Uber drivers are currently going through, you will be asked to furnish the permit when you apply for insurance. If you do, we can help you secure the relevant insurance.

To learn more about this issue, contact Kwiksure's experts today.