How Does Uber Affect My Car Insurance

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With more than 8 million U.S. users and 160,000 drivers, Uber is disrupting the transportation industry in an unprecedented manner.  By leveraging technology, they (along with other ride-sharing companies) transform the way we travel, especially in crowded, urban areas.

As the ride-sharing industry continues to grow exponentially, auto insurance companies are trying to figure out how and where to provide coverage for drivers that participate in these services properly.

Most personal insurance policies exclude all livery services, and commercial insurance policies are expensive.  Many ridesharing companies provide insurance for their drivers while paying passengers in the car; however, there are still gaps in insurance coverage that each driver needs to address properly.

Q: Why are companies like Uber and Lyft getting so much attention from auto insurance companies? 

A:   These companies are attracting significant attention from auto insurance companies due to their operations — providing ride-sharing services by contracting with drivers who use their personal vehicles to transport passengers.  These drivers do not typically have a livery driver’s license, nor are their cars registered or insured as commercial vehicles.

The issue is that personal auto insurance is not designed, underwritten, or priced to handle livery-type services.  They are written for personal use vehicles that may include the transportation of family and friends.  Therefore, most personal auto insurance policies exclude all livery services as typically handled on a commercial auto insurance policy.
In fact, most policies actually stop providing coverage from the moment a driver logs onto his ride-sharing app until the app is shut off.
Commercial auto insurance policies generally carry higher limits, are underwritten to recognize that commercial vehicles travel more miles, and cover exposures not included in private-passenger policies due to the increased risk of accidents and subsequent claims.
Q: Why don’t insurance companies cover ride-sharing?
A: The short answer: Auto insurers have not yet determined how to underwrite the risks of personal-line policyholders using their private-passenger vehicles on a for-hire basis.
Given the proliferation of companies like Uber and Lyft, however, it is likely that auto insurers will at some point start to offer policies that provide motorists with coverage for both traditional private use of a vehicle and commercial vehicle use.
Q: What is the government doing as far as insurance is concerned? Do any laws govern ride-sharing and insurance?
A:  For city and state governments, the two key insurance regulation questions are:

  1. Must ride-share drivers be licensed in the same way that taxi and other for-hire drivers are?
  2. If private-passenger policies do not cover ride-share drivers when working, how do they become properly insured?

Though many municipalities have yet to address the concerns above properly, some governments have already passed bills that insurance requirements and regulations for ride-share drivers.

For example, California recently passed a bill with the following requirements:

  1. Requires all ride-sharing companies to disclose to drivers upfront that the driver’s personal insurance policy will not apply while using their private-passenger vehicle for work activities.
  2. Requires commercial insurance from the moment the driver logs onto the app until the driver logs off.
  3. Clarifies that their commercial insurance is primary coverage.
  4. Requires the ride-sharing liability insurer to defend and indemnify drivers when they have a claim or accident while on assignment.
  5. Ensures coverage is not dependent on a private-passenger auto insurer first declining coverage.

Q: How can prospective drivers learn if they have sufficient coverage?

A: Prospective drivers should ask their ride-sharing company what level of coverage it provides. Most ride-sharing companies provide insurance coverage for their drivers, but only when they have a paying passenger in the vehicle.
Drivers should also contact their own auto insurer to address gaps, if any, in their liability protection. It is also recommended that ride-sharing drivers review a copy of their company’s insurance contracts to know the exact terms and conditions of the coverage.

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