Ride-sharing services such as UberX, Sidecar, Lyft, RelayRides and more are increasingly coming under scrutiny from local municipalities, states and insurance organizations for not carrying the proper insurance coverage.
The effect could be that commercial insurance agents have an opportunity to help people who provide rides a ride-sharing service or rent their vehicles via or car-sharing service get the proper coverage.
Personal car insurance will typically not provide coverage in these situations, even though it is largely being relied upon at this point. Some providers have their own commercial coverage, but it might be effective only if a driver is en route to pick up a ridesharing client or have one in the car. And when people are renting their vehicles to others via a ridesharing service, their personal auto insurance coverage probably won’t be much help.
“A personal auto policy does not provide coverage for situations when the vehicle is being used as a rental car,” said Loretta L. Worters, a vice president at the New York-based Insurance Information Institute. “RelayRides, or any peer-to-peer car sharing service, is doing a disservice to its customers by not disclosing to them that they are putting their personal insurance and perhaps their own assets at risk. These companies should let their customers know that if their vehicle is being used as a commercial venture, it should be insured with a commercial policy.”
Premiums for individual coverage are based on personal, not commercial, use of an individual's vehicle. "Submitting your car to ride-sharing exposes your auto to greater risk from weather, traffic, and drivers unfamiliary with the vehicle. Some insurers view car-sharing services as a higher risk, so they may cancel or not renew a driver's car insurance policy or increase premiums if a policyholders's vehicle is involved in an accident while it's being rented," Worters said.
In the insurance company's eyes, an individual offering their vehicle to strangers increases that individual's risk, because the person renting the vehicle may not be a good driver. Putting more miles on the car also opens it up to potentially more accidents," Worters said. It also exposes the insurer to greater risk if someone in that car is injured in an accident.
Regarding liability, Worters said many of these ride-sharing companies report to have $1 million in liability coverage. But then they have stipulations as to when you are driving personally or commercially. "What if there's a dispute about exactly when a fender-bender occurred? Was it while the rental company's insurance covered the car or when your own policy did? I know some [peer-to-peer] companies are experimenting with data recorders and phone apps to track time, mileage and who's behind the wheel so that could help. However there can be a lot of confusion determining when the person is driving for personal or commercial use," Worters said.
Due to all these issues, insurance companies, Worters adds, are reluctant to provide personal insurance for people who are active in these types of services. She said people who participate should verify that the ride-sharing or car-sharing services they use carry commercial insurance that is primary on any losses that may occur.
"The III supports insurance requirements for car-sharing and ride-sharing services similar to requirements for taxi cab services,” Worters said. “The principle is the same: Personal automobile insurance policies generally do not cover commercial exposures and are not adequately priced to cover commercial exposures — commercial enterprises should therefore be required to carry adequate commercial insurance.”
A recent article on Fox News mentioned that cities and states including Seattle, Chicago, Austin, Texas, and Colorado have recently considered enhanced legislation to subject ridesharing operations to stronger commercial insurance requirements. It also noted that ridesharing companies have formed an insurance coalition to study the issue, which has its first meeting scheduled for Wednesday, March 5, in California.