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Summary:

Rideshare companies are struggling to navigate the nuances of auto insurance policies, which currently leave drivers to rely on personal insurance in between rides.

While ridesharing companies like Uber, Lyft and Sidecar continue to expand their reach, the biggest threat to their success could be the mundane task of owning auto insurance. According to a report from Reuters, the nuances of insurance policies are preventing lawmakers from feeling comfortable having rideshares on the road — and one city even drove a company out of town.

The dilemma boils down to how, when and where drivers for a rideshare are covered by their employee’s auto insurance versus their own personal insurance. While companies like Uber have specific insurance that kicks in when a driver is transporting or on his way to a client, that policy does not cover accidents that happen while a driver is waiting to pick up fares. Worse, an auto insurance company can deny the claims that a driver makes while waiting for fares because ridesharing technically requires a commercial auto insurance plan — which costs up to five times more than a personal insurance policy.

It also adds a layer of complication in the way that victims and insurers find liability. For example, Uber maintains its claim that it was not liable for the New Years Eve death of a young girl in San Francisco, caused by a driver who was between fares but still logged in to the company’s app.

While it seems obvious that rideshare companies should just buy full-time commercial insurance for the fleet, the added cost of the new plan would almost certainly be passed down to the user. Rate increases and steeper surge pricing — a sore spot for Uber users in particular — could be even more damaging to companies.

Reuters says that Sidecar is researching a specialized insurance plan to mitigate the woes of insurance coverage without breaking the bank, but plans like those could take awhile to implement.

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  1. Thanks for digging into this. I always wondered how insurance worked with these companies. I just got a note from State Farm spelling out that they do not cover damage when if I lend my car out using a service such as RelayRides. I see RelayRides has that covered on the owner’s behalf https://relayrides.com/insurance

  2. Big difference in insurance for Uber drivers vs UberX … UberX is a response to Lyft and Sidecar, allowing normal drivers to use their own personal car without a limo license.

    Normal Uber drivers are covered by Insurance required to obtain their Limo License (in CA, that is the TCP number on the bumper issued by the CA PUC).

    Two totally different animals. Long and short of it is I don’t trust ride sharing companies due to insurance issues among others, but Uber is awesome!

  3. After 25 years in the auto insurance industry, with a 100% dedication to solving risk issues in both shared and autonomous mobility since 2007, this story is discouraging and encouraging at the same time. Discouraging in that the top 5 insurers, holding more than 50% of the market, are allowed to continue being a road block to business models constituting both tremendous societal benefits and commercial viability. The entire $400B auto insurance industry is founded on 2 very basic 100 year old realities: people buy cars which sit 90% of a 24 hour day and operate with low occupancy; secondly, a % of those will wreck. Forget the benefits of being income opportunities, saving lives, improving the environment, the empowerment of enabling access to mobility- right? Shared mobility= reduced ownership; autonomous= crash prevention. Both create jobs among a demographic group with 50% unemployment and $1T in student debt. Here is the punchline: While insurers claim many unknowns in shared mobility create risk, the FACT is that every shared mobility provider in operation use membership selection criteria equal to, or more conservative than, any of the top 5 preferred insurers. Finally, any of us can loan our cars to a friend, neighbor, or stranger without impacting our insurance. When was the last time you required a motor vehicle record before giving those keys to your cousin? Exactly….. Shared mobility which runs on a reservation platform accounts for every driver and every mile. Is this true for the tens of millions of miles driven by people we loan our cars to regardless of their record? Risk from unknowns…. please. Why encouraging? Stories like this bring sunlight to the truth. Could the shared mobility sector do more to mitigate risk- sure… and they are always improving their risk systems. Here is my ongoing message to all parties- keep protecting the status quo, after all, it worked for Kodak. The insurers who realize the day of giant killing have arrived need a carcass to feed off of. For the shared mobility community- stay the course, build relationships with your critics, and be smart about customer safety. The jeannie is out of the bottle, and soon insurance will be additional revenue, not a hurdle.

  4. Chris Arrowood Saturday, March 22, 2014

    You can sign up right now with promo code “ubermeplease” and get $20 off your first UBER ride!

    http://uber.com/invite/ubermeplease

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