Unless you’ve been living in a cave for the past few years or, like my parents, have only recently begun to indulge in the convenience of cell phones, you probably know what the shared economy is and the potential benefits it provides our society. These benefits include less waste, less cost, and more efficiency by borrowing or renting something owned by someone else. This revolution is led by the Ridesharing industry and their industry leader- Uber. And for those of you who have in fact been living in a cave for the past few years, Uber is a ridesharing app that is similar to a taxi service. The economic impact of Uber seems to have materialized over night. What once was a small start-up in San Francisco is now a $40 billion company that has changed transportation forever. Instead of hailing down a cab in a busy road, Uber allows travelers to hail a specified driver’s vehicle through a simple phone app. As with any revolution, the ridesharing industry has overcome a lot of opposition. For example, issues surrounding how to handle a potential liability suit between a driver and client if something were to go wrong came into question. How does insurance work when we are transporting someone peer to peer? This question, in many ways still has yet to be answered
Insurance companies have changed and adapted since their existence to meet the ever-changing needs of their clients. Coverage like identity theft, computer coverage, data breach, etc., are signs of adjustments to meet the needs of their clients. However, the sharing economy emerged so quickly that insurance companies are still playing catch up. Let’s take a look at how rideshare drivers are covered and how insurance companies are catching up to fill in potential gaps in coverage.
Although it varies some from company to company both on the insurance side and on the rideshare company side, the share experience is broken into four sections:
- Offline Mode
- Available Mode
- En Route Mode and On Trip Mode
The offline mode is how life was before the rideshare economy. Your standard auto insurance policy is in place. Hopefully, you talked with an independent insurance agent like the team at Bridge First Insurance and have a great personal auto insurance policy.
Next is the time period between trips. This is the time when the app is on and the driver is available, but does not have a passenger. In my opinion, this is one instance where the ride-share market insurance coverage seems to create a coverage gap. They include what is commonly called 50/100/25 coverage. This means the commercial insurance will pay up to $50,000 per injury the drivers causes to another, up to $100,000 total if there is more than one person and $25,000 for property damage. This is below Bridge First Insurance’s recommended level of coverage of $100,000 per person injured, $300,000 per accident and $100,000 for property damage. Lower coverage can leave the driver unnecessarily exposed. Many vehicles on the road have a value over $25,000. When the app is turned on the driver is no longer a person driving around on their day-to-day routine, but they are now a contractor working for a company and their personal insurance excludes coverage for such instances unless otherwise noted. So, if there is an accident that exceeds $25,000 in coverage the drivers may have to dig into their own pockets for that money.
En Route Mode and On Trip Mode
In Uber’s case, a $1,000,000 per incident commercial liability insurance policy kicks into place from the moment a driver accepts a ride until its ending destination. This is the “on trip mode.” This policy is primary. This means if there is an at-fault accident then this liability policy pays for damages caused by the driver first. In addition, Uber carries uninsured/underinsured motorist coverage. This means if an Uber driver is hit by someone who doesn’t have insurance or doesn’t have adequate insurance, the Uber policy with up $1,000,000 in coverage kicks in. They carry comprehensive and collision coverage for your vehicle as well contingent on the fact that you carry this coverage on your personal policy with a $1,000 deductible. This is something that may come as a surprise to a ridesharing economy driver that is used to a lower deductible.
Now that we have identified some of the insurance coverage in the ridesharing market and some of the potential gaps, let’s look at what personal insurance companies are doing to potentially bridge those gaps and make sure the ridesharing economy drivers are properly protected.
Earlier, I noted that many insurance companies exclude coverage when the insured is transporting a customer or they are available for hire. This is basically the definition of the share economy that Uber and Lyft drivers are part of. The main gap in insurance is when the driver is available, but does not have a passenger in the vehicle. The limits of 50/100/25 are much lower than the typical driver would have on their existing policy and could leave them exposed. Insurance companies, like Erie Insurance, are helping to pioneer new, extended coverage as a secondary option to their primary coverage provided through the ridesharing economy commercial insurance coverage. Erie applies new coverage to the driver when they are transporting a paying customer, on the way to pick up a customer, or if they are ‘available’ to pick up a customer. Erie’s policy extends coverage as a secondary option to make sure the driver is properly insured, but this does not account for lost wages while the driver’s vehicle is unable to be used.
Without a doubt the share economy is growing rapidly. Airbnb (a company where you can rent someone else’s home) is another example of a company that is rapidly changing the world and, according to recent reports, is larger than any hotel chain in America. Insurance companies will continue to adjust to meet the changing needs of clients in all aspects of their life. The ridesharing economy is a new and exciting idea that changes the risk and needs associated with a typical auto insurance policy. Erie, as well as other insurance companies, are on the forefront of adjusting to those needs.
As always, I advise communicating with your independent insurance agent or the gentlemen at Bridge First Insurance if you have questions about rideshare insurance. Some insurance companies do not extend coverage for ride share and it is important that you know if your company does or not. Omitting that you are a rideshare driver to your insurance company does not mean that your company will still cover you in an instance where you have an accident. In fact, it might leave you exposed. It may cost you a little more on the insurance side to be a rideshare driver, but it is well worth it to avoid potential gaps in coverage that currently exist.
Speak with a Bridge First Insurance Agent today! (571) 249-3857
Previously on the Blog:
Jack has achieved success in the insurance industry through a consultative and honest approach to clients. He designed this approach around educating clients on important coverage and allowing them to decide what policy would best fit their insurance needs. In 2013, Jack and co-founder Dave Zappacosta, established Bridge First Insurance, as an independent insurance agency operating in Virginia, DC, and Maryland.