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.