Update on insurance issues at Uber
A couple of weeks ago I suggested that the sharing economy is actually sharing something, namely insurance costs. In particular, I was concerned about the gaps in insurance coverage represented by Uber drivers and AirBnB hosts at certain times. Here’s a cheat sheet:
- Personal insurance covers Uber drivers when their Uber app is off, so they are simply driving around.
- Uber covers them when they have passengers, although their deductibles are sometimes high.
- But what about when they have their app on, so are looking for customers, but those customers are not in the car? There’s apparently no coverage for this.
- This actually matters; a child got killed by an Uber driver in exactly this situation. Actually more than one child.
- Also, there are chat boards of Uber drivers suggesting how to hide the fact that their app was on in case of an accident; clearly this only applies to minor accidents, not major ones, but it supports my original theory that all of our car insurance policies will be going up because of Uber drivers.
Well the news this week is that Allstate has created a new insurance policy for Uber drivers which will cover them when their app is on, so they’re “commercial,” but before a customer has been picked up. This leaves me with a few questions.
- They said it will cost $15 to $20 on average, per year, which seems very very small. Does that include the asston of registered Uber drivers that don’t drive very much at all? Will it cost an arm and a leg to cover a heavy user of Uber?
- Who pays for this, Uber or the drivers? According to reports, Uber was working very very hard to avoid this insurance from existing, or rather they were pushing very very hard against regulations in California that would insist on separate insurance coverage to fill the gap.
- That makes me think this is a big deal for Uber, and it’s way more expensive than it sounds, and that Uber doesn’t want to pay for it.
- If the drivers are expected to pay for it, and if it’s more expensive like I suspect it is, then their hourly wages are going down, maybe to shitty levels.
- That’s kind of what happens when you create a business models that make money in part by bypassing regulations, and then the regulations catch up with you: your profit margins fall.