Paul Dreher Director of Personal Insurance View Bio

ride sharing and insurnace FAQs

Ride Sharing and Insurance: Everything You Need to Know about Coverage for TNCs like Uber and Lyft

Our friends at the Insurance Information Institute helped break down some of the most common questions about ride sharing companies like Uber and Lyft and how they are affected by insurance.

Q: What is ride-sharing and why is it getting so much attention from insurance companies?

A: Ride-sharing businesses provide taxi-like services that enable passengers to arrange rides on short notice via a smart phone app.

Transportation Network Companies (TNCs)—the official name for ride-sharing firms, first adopted by the California Public Utilities Commission — provide ride sharing services in part by contracting with drivers who use their personal vehicles to transport passengers. These drivers do not generally have a livery driver’s license, and their cars are not registered or insured as commercial vehicles. Uber is the best-known TNC, and its UberX service relies on just such drivers who use their own cars.

UberX and other TNCs have attracted the interest and concern of insurers and insurance regulators precisely because private-passenger auto (PPA) insurance is not designed, underwritten, or priced for commercial ride-sharing. Private-passenger motorists transport themselves, family members, and friends, with average annual travel reaching about 12,000 miles per year. No money is made from these private trips.

In contrast, like taxicab companies, TNCs are commercial enterprises that provide transportation services. Because personal auto policies are not designed to cover commercial activities, such personal policies typically exclude livery services. Therefore, in order to have coverage, TNCs need commercial insurance coverages, like taxi companies and livery car services. Commercial policies generally carry higher limits, are underwritten with the recognition that commercial vehicles travel more miles, and cover exposures not included in private-passenger policies. For instance, customers might file suit against a for-hire driver, which wouldn’t be covered by a private-passenger auto policy.

TNCs, on the other hand, note that ride-share vehicles do not operate like traditional taxis. A single taxi is often almost always on the road and can travel upwards of 70,000 miles annually, whereas ride-share cars are used considerably less. In reality, some TNC drivers drive part-time, and some drive full-time.

Q: Does a TNC driver’s personal auto policy cover ride-sharing?

A: Generally a TNC driver’s standard personal auto policy will not provide coverage for ride-sharing. A standard personal auto insurance policy stops providing coverage from the moment a driver logs onto a TNC ride-sharing app to the moment the customer has exited the car and the transaction is closed.

Q: Do insurance companies oppose ride-sharing services?

No. Insurers want to make it clear, however, that a personal automobile policy is designed to cover only the traditional use of private-passenger vehicles; it is not designed or underwritten to cover the commercial use of a vehicle. This exclusion extends to more than just ride-sharing. It includes any business use of a vehicle—such as using a pickup truck to plow snow off driveways or to deliver newspapers.

Numerous state insurance regulators have also noted that passengers are taking a risk when they retain an uninsured—or underinsured—TNC driver. In the event of an accident, an injured TNC passenger may not be able to recoup damages, as they would from a traditional licensed and commercially insured taxi service.

The insurance industry welcomes the innovation and competition that TNCs have brought to the for-hire ground transportation marketplace. While this new market is still evolving, the insurance industry will likely develop and offer products that address the insurance gaps that are of concern to policymakers.

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. Surplus lines insurers, who sell policies that aren’t available from state-licensed insurers, are providing coverage currently to TNCs.

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 on behalf of a TNC.

Q: What is government doing as far as insurance is concerned? Do any laws govern ride-sharing and insurance?

A: City and state governments have been intensively discussing how to respond to the extraordinary growth of TNCs, given that the TNC business model does not fit neatly into any of their current transportation or insurance regulatory schemes. The two key insurance regulation questions are:

Must TNC drivers be licensed in the same way that taxi and other for-hire drivers are?
If private-passenger policies do not cover TNC drivers when they are working, how do they become properly insured?
Signed into law in June 2014, Colorado’s Senate Bill 125, the Transportation Network Company Act, has won widespread praise for addressing these questions. The bill affirms that, through mid-January 2015, TNCs must provide primary insurance coverage for the entire time a driver’s app is on. Auto insurers may rightfully deny personal-line policyholder claims arising out of incidents involving TNC-affiliated private-passenger vehicles.

Effective January 15, 2015, either a TNC or its drivers must have policies that:

  • Specifically cover TNC activity
  • Provide primary liability coverage of at least $50,000 per injured person, $100,000 for all injuries in an accident and $30,000 for property damage

Regulatory compliance can be achieved if a TNC provides its drivers with 24/7 commercial coverage or the driver secures an appropriate rider or endorsement to his or her private-passenger policy, covering the vehicle’s periodic TNC-related use. As an alternative, a TNC can purchase a commercial policy that covers its drivers only for the time when a TNC driver’s app is on.

Q: Are any other states responding to this issue?

A: California is worth special mention because ride-sharing has grown exponentially in cities such as Los Angeles and San Francisco. In September 2014, Governor Jerry Brown signed into law Assembly Bill 2293, which at the last-minute was supported by Uber and Lyft. The bill was sponsored by the insurance industry because it:

  • Requires TNCs to disclose to drivers upfront that the driver’s personal insurance policy will not apply while using their private-passenger vehicle for a TNC assignment
  • Requires TNC insurance from the moment the driver logs onto the app, until the driver logs off
  • Clarifies that TNC insurance is primary coverage
  • Requires the TNC’s liability insurer to defend and indemnify drivers when they have a claim, or accident, while on assignment
  • Ensures TNC’s coverage is not dependent on a private-passenger auto insurer first declining coverage
  • According to the Los Angeles Times, for Period 1 (from log on until match), drivers or the TNC would buy a basic primary policy, covering $50,000 for death or injury for one person in an accident, $100,000 for all persons and $30,000 for property damage. TNCs would have to purchase excess liability policies covering an additional $200,000 in damages. For the remaining period of time (from match until the passenger exits the vehicle), the TNC would maintain a $1 million liability and $1 million uninsured/underinsured (UM/UIM) policy. The law takes effect July 1, 2015

Q: Would a passenger’s personal auto policy provide coverage for an injury incurred in a ride-share vehicle accident?

A: Probably not, because private-passenger auto insurance policies were never intended to provide coverage for injuries incurred while the vehicle was engaged in a commercial enterprise.

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

A: Prospective drivers should ask the TNC what level of coverage it provides. Drivers should also contact their own auto insurer to address gaps, if any, in their liability protection. It is also recommended that TNC drivers review a copy of their TNC’s insurance contracts so they know the exact terms and conditions of the coverage.

Uber asserts that all rides on the Uber platform are backed by what the company characterizes as a best-in-class corporate insurance policy. Meanwhile, Lyft has said “drivers and passengers are covered by Lyft’s $1 million commercial liability policy while matched on the platform” and, at least in Florida, that, “Lyft’s commercial liability insurance is also now primary to a [TNC] driver’s personal policy.”

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