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Update on insurance issues at Uber
June 5, 2015
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.
Categories: Uncategorized
mathbabe 
The post makes it seem like pre-Uber taxi drivers (for example) were footing the insurance bill out of their own charity and not passing the costs along to the customers …
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There’s a parallel issue with car rentals. “Mass affluent” New Yorkers who don’t own a car, and have no personal auto insurance, have insufficient liability coverage when they, say, pick up a Zipcar for an hour. In the worst case they could be wiped out financially.
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Basic insurance issues haven’t been addressed here. The vast majority of personal auto policies are priced based on usage rates (miles/year) and have strict provisions that commercial use of the vehicle will invalidate the entire policy. Commercial auto policies (used by traditional taxi companies, or corporate vehicle fleets) are priced based on the risks in those environments. If I buy a vehicle thay I plan to drive 60 hours a week for Uber, how can my personal policy remain valid? The referenced Allstate policy hypothetically could serve as a rider policy that overcomes this problem, but it seems totally inconceiveable that Allstate would need only $20/year to bridge the gap between the risk of insuring a private driver and the risk of insuring a commercial taxi operator. Any solution here would require much greater transparency as to the actual coverage provided by whatever policies Uber may pay for.
If I am injured by a Yellow Cab (either as a passenger or outsider hit by their vehicle) I have clear financial recourse against the taxi company, backstopped by the local regulator who has mandated insurance coverage. If I am injured by a Uber, I have to hire lawyers to sort through a maze of liability issues, and face the risks that the drivers insurance company will refuse to pay (because the policy didn’t cover commercial operation) that Uber refuses to pay (we’re just a software company, take this up with the driver) and that driver does not have the resources to cover the costs. Level playing field insurance regulations could solve all of this, but Uber is determined to evade them, so they can pass on costs and risks to passengers and drivers.
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3rd point about Uber is false as stated. You may argue that it’s insufficient etc, but it exists and is clearly highlighted on their webpage on the topic: http://newsroom.uber.com/2014/02/insurance-for-uberx-with-ridesharing/
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There is a critical difference between insurance coverage verified by local regulators as a minimum requirement before a taxi company can operate, and a press release asserting the existence of insurance. Does the coverage asserted by the PR folks meet the same requirements that other taxi companies have to meet? Are there hundreds of riders and caveats that limit the applicability of the stated coverage? If Yellow Taxi made it difficult for an injured customer to recover damages, the local regulator would quickly intervene. If Yellow Taxi’s insurance didn’t actually meet the stated standards, the regulators would revoke Yellow Taxi’s licence. If Uber makes things difficult, or suddenly insists that its coverage didn’t apply in a given case, good luck, youre on your own. Perhaps the insurance decribed in the press release is adequate, but this would need to be documented in a much more transparent fashion. Given Uber’s long history of responding to consumers and regulators with a raised middle finger, there’s no reason to give their PR people the benefit of the doubt.
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— “the sharing economy is actually sharing something, namely insurance costs.” —
If that is your point, Uber is almost the worst possible example, since they are wholly dependent on regulators, local government, and insurance companies to operate. It is only the novelty and lack (until recently) of sufficient scale that stopped governments/insurers/courts from clarifying what shall and shall not fly. Ignoring the status quo regulation, if that is what Uber does, is a business decision to enable faster expansion. It might be better or worse than business decisions of rival businesses such as Lyft in the long term, that remains to be seen. There are also very simple solutions that will develop voluntarily or be forced from on high, such as Uber and the insurers sharing information about individual drivers.
Craigslist rental ads are a much better example of the cost-sharing phenomenon, since there is much more latitude to use one’s property in violation of status quo regulations (zoning, taxation, condo rules etc) without anyone noticing or the Powers That Be having nearly as much recourse as for automobile-based businesses. Airbnb is just the for-profit version of Craigslist.
The real cost-sharing issue from “sharing economy” internet markets is that the old category-based regulation, classifying everything as either low-intensity private use or else public/commercial use, becomes obsolete on-the-ground. But there is nothing horrible if the rates change to account for that, nor is it necessarily any more unfair than the current distribution of insurance costs. There will be winners and losers, as there were before the Internet.
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