Ride-sharing is Driving Insurance Crazy

Once upon a time…

It was the summer of 2016 when my wife and I were almost a month into exploring Bali, Indonesia by way of motorbike. The deep turquois ocean and never-ending beaches were all starting to blend in, and the intrinsic magic of an island paradise was beginning to fade away. We were in desperate need of a change in scenery, so we decided to head inland to the hippie-laden jungle town of Ubud. It was about a 3 hour drive from where we were, so we had 2 options to get there: Taxi or Uber. To put it lightly, the taxis in Bali aren’t necessarily known to have the most accurate meters. Uber is about half the price, but they’re also operating illegally in the country. After a moment of deliberation and consience ignored, a black unmarked SUV pulls in front of the hotel next to our apartment and we quietly pack our bags. With the hotel in the mirror, safely on our way, we release a long sigh of relief.

You had me at “share”

Transportation Networking Companies, better known as ride-sharing companies, like Uber and Lyft are becoming more and more popular. The basic premise is that any qualified driver can use their own personal automobile to drive others for a fee. As a customer, these are often cheaper than taxis and with one click you have someone rushing to pick you up…no hand-flailing needed. If you’re a driver, it’s an easy way to make some extra cash or even make it a full time job that works around your busy schedule. What’s not to love? The emergence of “sharing” services like Uber, Lyft, Airbnb, and VRBO have created a whole new risk category for insurance companies. Admittedly, the insurance industry is slow to adapt to change and ride-sharing services are no exception. Insurance itself is based on actuarial data (statistics used to calculate risk), so if there aren’t statistics because an industry is so early in its development, it’s very difficult to calculate that risk. That’s why it’s so difficult to find coverage on a personal auto policy when driving for ride-sharing services.

What’s covered…or not so much

Ride-sharing services do provide some limited, okay VERY LIMITED, coverage. For example, when the Uber app is on, they’ll provide at least $50,000 per person and $100,000 per accident for personal liability, and may include Personal Injury Protection for medical coverage and uninsured/underinsured motorist coverage if required by state law. However, there is no comprehensive or collision coverage provided in the initial stage when the app is on, but no trip has been accepted.

Once a trip is accepted, until its conclusion, liability coverage goes up to $1,000,000 per accident and $1,000,000 for uninsured/underinsured motorist coverage. During this time, if you have comprehensive and collision coverage on your personal auto policy, Uber will cover up to the actual cash value of your vehicle with a $1,000 deductible.

What you don’t know CAN hurt you

Typically, your personal auto policy will provide coverage before you turn the app on and after you turn it off. Once the app is on, the vehicle is considered being used for, in insurance terms, “public or livery conveyances”. Basically, you’re using your car for hire. You’re treated just like a taxi and that coverage is specifically excluded under most personal auto policies.

That means you’re relying solely on Uber’s extremely limited insurance policy once the app is turned on. The problem lies in that Uber’s insurance policy doesn’t cover ANY physical damage and only provides $50,000/$100,000 liability coverage before you accept a trip.

If, when the app is on and before you accept a trip, you seriously injure someone in an accident and you’re found legally liable for their injuries, will $50,000 be enough to cover what you’re legally liable to pay?

Unfortunately, I can’t answer that. No one can answer that. Insurance exists for this very circumstance. Your insurance policy pays for unexpected damages in a covered loss. However, it only goes up to the policy limits. If you’re found liable for $500,000 and your policy only covers $50,000, does that change the fact that you’re still legally liable for the remaining $450,000? No, you’re still on the hook for the remaining balance.

That’s why it’s so important to carry the highest possible liability limits on all of your insurance policies. Plus, liability coverage is one of the cheapest parts of the policy, so increasing your limits is usually a minimal increase in premium. Remember, driving for Uber is excluded under most personal auto policies though, so your liability limits wouldn’t provide coverage anyways.

It’s not all bad news

You might be thinking to yourself, “It looks like I’m screwed either way, so I might as well stop driving for Uber”. Don’t worry, all isn’t lost. There are some companies that are beginning to offer options for coverage on personal auto policies when using ride-sharing services. This coverage usually comes as an endorsement or “rider”. However, most companies still don’t provide this coverage, so it would be well worth your time to call one of our agents and have a conversation regarding your specific needs. We’ll be happy to go over your specific situation and show you all of the available options.

In conclusion

Sharing services have all but taken over the hospitality and transportation industry. Companies like Uber and Airbnb often offer a better customer experience at a lower cost than traditional means, such as hotels or taxis. It works out great for both the consumer and service provider. The problem lies in the fact that the insurance industry is slow to adapt to change. There could be gaps in coverage or even complete exclusion of coverage regarding many of the modern services that are so popular. Knowledge is the best way to protect yourself and your assets. The more you know, the better you can prepare for what may or may not be covered. Feel free to call one of our agents at 1-800-644-6030 to make sure you’re getting the coverage you need.

Robert H. Bourdeau

Without risk, there are no rewards.But when taking risks, it's important to ask "is it worth it?" Most of us are not good at evaluating risk. That's why I love insurance. When you get it, you realize that you have a tool for making choices. We can put ourselves out there, enjoy life and strive for personal and financial growth. When we fail, insurance gives us a way to recover financially, and we learn to be better. I'm a lifelong student with degrees in mathematics and computer science, a licensed insurance producer, and hold professional insurance designations including CPCU, CIC, and CRM.I enjoy distance running, bicycling, craft beers, cool people, and taking risks.

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