Ridesharing – How it is affecting the Insurance Industry

October 22, 2014

Ridesharing – How it is affecting the Insurance Industry

The popularity of commercial ridesharing, which connects drivers and riders for a fare with the click of a button on a smartphone app, has skyrocketed across the country in recent years. Transportation network companies (TNCs) like Uber and Lyft have not only “disrupted” the taxi’s traditional drive-for-hire business model, but have also presented challenges for policymakers and insurers who have a vested interest in protecting the public.

The story that triggered the demand for regulations to be reviewed and reshaped, emerged into public view New Years’ Eve of this year when a driver for Uber struck and killed a 6-year-old in San Francisco. Since then, as the TNCs expanded their operations across the country, controversy, cease-and-desist orders, fines for operating without a license, and legislative and regulatory battles have followed.

In California, there has been the start of some groundwork for where responsibility lies regarding the carrying of insurance during a ridesharing activity. California Insurance Commissioner, Dave Jones recommended at a summer Department of Insurance investigative hearing that Transportation Network Companies (TNCs) such as Uber, Lyft and Sidecar should bear the insurance burden when they encourage non-professional drivers to use their personal vehicles to transport passengers for a profit. “As long as TNCs are encouraging non-professional drivers to use their personal vehicles to drive passengers for a profit, a risk which personal automobile insurance simply does not cover, TNCs should bear the burden of making sure that insurance is provided. Our recommendations will ensure there is insurance protection for passengers, drivers and pedestrians”, said Commissioner Jones.

Commissioner Jones’ recommendations included:

  • Requiring TNCs to provide $1 million commercial liability insurance that begins the moment a driver switches on the app
  • Requiring TNCs to provide $1 million uninsured/underinsured coverage to protect the driver and passenger
  • Requiring TNCs to provide insurance policy information to TNC drivers to carry in their cars
  • Requiring TNCs to disclose to drivers that their personal auto insurance coverages may not apply while they drive for the TNC
  • Requiring TNCs to provide comprehensive and collision coverage for the driver’s auto if the driver has those coverages on the driver’s own policy
  • Legislature should revisit the ridesharing and casual carpooling laws to allow for apps that match not-for-profit drivers with casual riders

Much of these measures have been proposed as changes to the current regulations while there is still discussions regarding other forms of ridesharing; such as and not limited to, ordinary carpooling, ride for hire, and “private client” fares not included in a TNC app.

Bottom line, make sure to review your auto uses with your insurance broker when involved in any form of ridesharing activity. Let our experienced licensed representatives at The Armstrong Company Insurance Consultants help answer your questions on your ridesharing activity and how best to limit your exposure to liability. Contact us today or Request a Quote online to find out how to protect your business and your future. We are here to work for you!