Auto Insurance, in the Time of Ridesharing Apps


In today’s fast-paced technology age, it’s very common for a new technology to come along that completely changes the way we, as a society, view the status quo. Around 2012, the rising popularity of an app called “Uber” introduced us to a brand new way to hail a ride – and for the taxi and transportation industry, things haven’t been the same since.

However, for insurance carriers and their clients, the transition into the new nationwide standard for getting around hasn’t been swift or seamless. So what exactly made this shift so confusing and difficult?

A technology service, not a taxi service

Like its competitors Lyft and Sidecar, Uber is known as a “ridesharing” company. That means they don’t consider themselves a taxi service, but a technology company – one that simply provides a medium (the app) for drivers to offer their services and customers to hire a ride. By that definition, why should a third-party facilitator hold any liability in the case of an accident?

However, taxi companies feel quite differently. Their argument? Uber sets the rates for both the passengers and the drivers, they collect the money and pay the driver, they hire the drivers, and if they don’t perform, Uber even fires the drivers. Common sense would suggest that, whether they like it or not, Uber and Lyft are taxi companies. A lack of liability may equate to cheaper prices, but it’s a risky and unethical way of doing business, some argue.

So who pays for an accident?

At Uber and Lyft’s inception, regulatory policies for ridesharing didn’t exist, so everyone more or less went along with the companies’ claims that participation in ridesharing placed liability on the drivers. Insurance companies, however, were not on board. As is expected of a person who earns their living by driving, the insurance companies saw Uber drivers as commercial drivers, and wouldn’t cover an accident that occurred while on the job under their standard personal policy. There were even reports of some insurance companies dropping customers from their personal policy upon finding out they were ridesharers.

To make things even more confusing, when Uber finally did offer commercial insurance coverage in 2014, it came with a tremendous gap.  When the app is off, Uber said, the driver was covered under their personal auto insurance. When the app is on and a passenger is on board, Uber’s commercial insurance kicks in. However, during the gap when a driver is using the app but searching for a rideshare customer, they were not covered by either plan.

The breaking point

Last year, the problem with rideshare insurance came to a head when an Uber driver in San Francisco struck an entire family with his Honda SUV, killing a six-year-old girl. Because there were no Uber passengers on board, Uber denied liability in the family’s wrongful death lawsuit.

The public was outraged. California promptly took a look into regulations and increased minimum liability requirements, including a requirement to provide insurance from the moment a driver turns on their app.

Rideshare insurance today

After California’s precedent, insurance companies were forced to search for a solution to the problem – and quickly. New rideshare-specific insurance policies, which combine personal and commercial coverage, have begun to trickle into the market within the past year.

Today, almost all of the major carriers have begun offering rideshare insurance policies for Uber and Lyft drivers, but availability is still sparse in some states. With rideshare popularity greater than ever, and in the spirit of bundling home, auto, and other insurance policies, insurance companies are working hard to build reliable and flexible policies around this emerging market.

Please note: This is for information purposes only, Insured Solutions, Inc. does not have auto insurance programs. 




Carrie Charity Murphy is a freelance writer for Insured Solutions and Improve comedienne based in Louisville, Kentucky. She lives with her husband Ben and their two dogs, Sprocket and Ms. Brisby.
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