It appears that the idea was that people who were worried about penalties for evading fares on Melbourne public transport - particularly those lovely trams - would be able to contribute money ($19 per month) to an 'insurance' scheme, which would pay the fine for evaders who were caught by fare inspectors under the Transport (Compliance and Miscellaneous) Act 1983 (Vic).
One enthusiast claimed that "It's cheaper than buying tickets and has attracted around 1000 members since launching a couple of weeks ago". A proponent characterised the scheme as a fighting fund rather than insurance, with the comment "We will pay out all fines up to the limits of Tramsurance's income. Everyone has basically put money into a pool and then people claim their money out of it" and that "“We’re considering $19 per month. (But) to compare that, it’s $120 a month if you’re buying [the standard monthly ticket]”.
The state public transport authority (Public Transport Victoria) was unimpressed, arguing that the scheme was illegal because it incited consumers to break the law and that there were questions about whether the scheme could be made to work (eg would contributions be safeguarded and what would happen if the detection of a few evaders absorbed all of the contributions?).
There are arguably better ways to express discontent with ticket prices or the management of the public transport system than what seems to have initially promoted as an insurance scheme. One reason is that insurance in favour of an illegal act is in itself unviable. Australian law does not for example endorse insurance against loss of illegal drugs, failure of an assassination or an unsuccessful bank robbery. As a corollary it does not welcome insurance against imprisonment or fines imposed for criminal behaviour, eg if you are convicted for burglary you get to cash in at your insurer's expense.
Another reason is that the operation of insurance schemes and financial services schemes involves compliance with national law, notably the Insurance Act 1983 (Cth). It is highly unlikely that APRA, the national regulator, is going to be enthusiastic about a scheme that centres on illegality and would be persuasively claimed by the Victorian Government as contrary to the public interest. There is no indication that the students have the expertise required for compliance with regulatory requirements for offering an 'insurance product' or more fundamentally that they would satisfy the capital requirements regarding insurance. The likelihood of gaining a licence under the Financial Services Reform Act 2001 (Cth) for Tramsurance as a financial service is equally dim. The Dario Fo financial model, however well-meant and irrespective of whether it was promoted at an entrepreneurship event, simply won't fly.
Tramsurance initially put on a brave face after receiving a 'cease & desist' letter from Public Transport Victoria. It stated that -
we're coming against some very strongly worded letters. Never fear - it'll take more than words to stop us. There is too much momentum and support behind us now. All we have at this stage is an idea, an idea that has become very popular very quickly for one reason. The Melbourne public is dissatisfied with with how public transport and Myki have been handled. Public Transport Victoria is threatening to litigate against us rather than address the concerns of those it represents.
We will not take down the site. That would be a little silly given that we haven't operated anything yet. Tramsurance started off as a simple experiment, but we can all agree that it's much more than that now. We are currently seeking legal advice to better understand the options open to us. Rest assured, the final version of Tramsurance will operate fully within the law. We will announce our decision tomorrow, when we are better informed. In the meantime, please don't fare evade. That's against the law.The organisers subsequently released an Open Letter that states
Tramsurance started only as an idea. Most people I know evade the fares every now and then. Why? Some didn’t want to endorse a system that didn’t represent them, but most just couldn’t afford to. It’s cheaper for them to pay the occasional fine than to pay for the fares. I understood that mathematically at least, Tramsurance could exist.
It is not just an idea any more. We were not surprised at the support for Tramsurance, though we didn’t expect it to explode like it did. This indicates how poorly the transport system has served its users. There would be no demand for Tramsurance if we were satisfied with the public transport in Melbourne. Demand has, of course, been explosive.
To address Public Transport Victoria’s statement we’ve publicized, we have no intention of breaking the law. Nor have we ever. We do not advocate fare evasion, even of a system whose fares are unaffordable to the more vulnerable members of society. It’s against the law. Don’t do it. We’ve outlined with our idea a simple possibility, and with that the failure of our government to meet the needs of its people.
Public Transport Victoria claims we are encouraging fare evasion. We have said we do not, repeatedly. Whether the proposed fund would encourage it is moot, but all we have is the proposal. We have not facilitated any transactions or written any code to do so. We don’t plan to either. Tramsurance is an idea that has simply illustrated the failings of our public transport system. It’s reprehensible that the government would rather threaten two 19 year olds than address the concerns of those it is supposed to represent.In May this year the PTV announced [PDF] that there had been a 16% increase in the number of tickets being checked, with 154,000 fines for ticketing offences (up 47% on the previous year) - "no longer a case of if you get caught, but rather when” - and "a substantial decrease in the tram fare evasion rate, down from 20.3 per cent in May 2011 to 13.3 per cent in May 2012".