What has been dubbed the ‘insurance gap’ for Lyft, Uber and Sidecar users may be closing with new hybrid personal-commercial auto policies – and it is a solution that should work, says one industry expert.
“This will hopefully be a good news story, from an insurance and regulatory perspective,” says Peter Kochenburger, a professor of insurance law at the
University of Connecticut School of Law. “This is one that isn’t that complicated. The industry knows how to insure autos, and insure taxis and personal autos – so it is just a matter of who is going to cover what and when.”
The solutions can come from a number of places, Kochenburger told
Insurance Business, and probably it will come from the personal lines carriers to cover the insurance gap.
“There are three set periods of potential exposure. One, an Uber driver is going around hoping to get business. That is period one,” says Kochenburger. “The second period is he’s been contacted and is en route to pick up the passenger. The third is him or her picking up the passenger and going to where the destination is.”
The actual driving of the passenger is where the Uber policy would apply, says Kochenburger, but it is the second one is where the insurance gap is.
The first period is where the personal driver coverage would apply.
At least five companies are exploring new products for ride-service drivers, according Chris Shultz, deputy commissioner of the California Department of Insurance.
According to the San Francisco Chronicle, the department said it’s ready to accept applications to create policies to cover drivers when they turn on a smartphone app indicating they’re available to accept riders but haven’t yet received a request, a time called ‘Period 1’ in the industry.
The gap happens because the ride services’ $1 million commercial policies don’t kick in until a driver is en route to pick up a passenger (although some offer lower Period 1 coverage), while personal policies usually refuse to cover for-hire driving.
In Califorinia, a new law called AB2293, which comes into effect on July 1, 2015, sets out minimum coverage for Period 1.
“We’ve opened the window (for applications) early to try to get the insurance in place sooner so the drivers and everyone else will be protected,” Shultz told The Chronicle.
AB2293 requires Period 1 coverage of $50,000 for injury to one person, $100,000 for multiple persons, and $30,000 for property damage.
In Toronto, Ont., that city’s executive director of municipal licensing and standards Tracey Cook said that UberX poses a risk to residents, and that anyone using the services does so at their own peril.
However, Toronto mayor-elect John Tory is a supporter of UberX, and told the media that ‘it is time our regulatory system got in line with evolving consumer demands in the 21
st century.”
Uber’s Lauren Altmin told CBC News that “every ride on the UberX platform in Canada is backed by $5 million of contingent auto liability insurance.”
U.S. regulators hope each policy will apply to all the ride companies, since many drivers log into two or more services to increase their chances of getting a quick match to a ride request.
“If there’s confusion about who’s responsible, it would complicate every fender-bender,” Shultz told reporters. “We’re trying to avoid that by ensuring drivers can buy an endorsement that covers multiple services, and isn’t just exclusive with Uber, Lyft or Sidecar.”
So far some five unidentified insurers have expressed interest in providing this type of insurance, with one –
MetLife Auto & Home – stating bck in May that it was working on coverage for Lyft drivers.
