Ridesharing services like Uber and Lyft are rapidly growing in popularity and geographical coverage. But serious questions remain about insurance coverage for drivers who participate in these services.
Erie, PA-based Erie Insurance Group has jumped into the fray by introducing a new policy model that covers ridesharing drivers, before, during and after the rides they provide to customers.
Personal auto policies do not cover drivers for business use of their vehicles. But policies for business use of those vehicles have historically only been designed to address common needs such as deliveries and customer visits. The use of personal vehicles for taxi-like services creates new risk exposures not covered by such policies.
In one notable incident, a driver who was signed onto an Uber app—but not actually carrying an Uber passenger—ran over and killed a six-year old girl in San Francisco.
This incident and others have led ridesharing companies to up their coverages for liability and underinsured drivers, but it is still unclear how those policies protect the drivers themselves. And many ridesharing drivers do not fully understand the extent of their own exposure.
“Most people don’t realize that their personal auto policies don’t cover them using their vehicles as a taxi,” said Cody Cook, Erie’s VP of auto products. “We saw a need in the sharing economy and filled it."
Erie is initially offering this coverage in Illinois and Indiana only, but plans to add other geographies based on the demand and learnings from this pilot rollout. Coverage is subject to limitations and exclusions.
The company claims that this new offering is the first of its kind.
Donald Light, Director of the Americas Property/Casualty Practice at Boston, MA-based research and consulting firm Celent, sees three main positives in Erie’s announcement of its new ridesharing coverage. “First, this announcement gives Erie greater visibility in a high-profile part of the digital economy,” he says. “Second, Erie is doing it very simply by removing the business-use exclusion from its existing policies. And third, Erie is wisely limiting its exposure by initially offering the modified policy in only two states.”
With both Uber and Lyft growing at an estimated 10 percent monthly, other insurers may want to follow suit. However, insurers will also want to closely track other regulatory responses to the ridesharing phenomenon, which is perceived as a threat to traditional (and often tightly regulated) taxi and livery services. Many observers have also expressed concerns about the fact that ridesharing drivers are not formally trained and may spend too much time interacting with their mobile devices—which may pose a hazard.
