by Ryan Delp, CIC
The emergence of ride sharing over the last several years has turned the limousine and taxi industry on its head. And, as with other emerging trends in society, the insurance world has had to adjust to keep up with the times.
Traditionally, it has been very difficult and expensive to insure a limousine or taxi. These vehicles are considered a livery service. Most insurance companies shy away completely from providing this type of coverage, because of the greater chances for loss, damage and injury. So when the ride sharing phenomenon came about in 2009 with the emergence of Uber, it created a dilemma for insurance carriers. As with many new “exposures” (risks for potential loss or damage), the insurance industry started by simply saying it would not cover ride sharing services at all.
However, over time, and after cautiously observing the dangers involved—and most likely having some actuaries get involved—the industry has shifted. Some carriers will now cover part of the ride-sharing risk. Here is the breakdown of coverage.
Essentially, today’s Uber or Lyft drivers can, at any given moment, fit into one of three different states of activity:
- Normal, everyday activities that have nothing to do with ride sharing. This includes things like getting groceries and taking kids to soccer practice. Obviously, insurance carriers have been offering this kind of protection since the onset of cars. This is not a problem.
- Actively providing livery service by carrying a fee-paying customer. The insurance companies want no part of this, and they provide no coverage.
- Waiting for a fare, with the Uber or Lyft app on. In this case, the driver is waiting for a request but does not have a customer in the car. This is a gray area. Technically, the driver is not providing livery service, but he or she is certainly in the position to take on the risk at any minute.
So how has the industry addressed these complications? How can a company insure a vehicle that, at times, is a very benign risk; at others, has a questionable risk; and at still others, does not qualify for coverage at all?
Here is where we stand today, after much angst and back-and-forth negotiation among ride-sharing and insurance companies:
When a vehicle has a fee-paying customer in the car, the ride sharing company will provide coverage. At all other times, the driver’s personal insurance company takes responsibility for covering the vehicle. That being said, a number of carriers—most of the top national carriers included—still will either not cover ride sharing vehicles at all or will put them on a commercial auto policy.
However, a growing number of regional carriers now offer ride sharing coverage as part of a personal auto policy. These carriers include a question on their application that asks about ride sharing. There is a charge for this additional risk, obviously, and the amount varies among companies. But at least coverage is out there. If you already have a policy in place and want to start driving for Uber or Lyft, be sure to check with your agent to see if your carrier will cover it. Remember, many insurance carriers exclude this coverage, so you will want to check with your agent before finding out the hard way.