Transportation network companies (TNCs), better known as ride-sharing services, such as Uber, Lyft, and Sidecar, have created challenges for regulators and insurance companies. However, as cities and states work on governing this new mode of transportation, insurers should take advantage of the opportunity to develop new products covering ride-sharing drivers.
In their article “Ride sharing and insurance issues,” Milliman consultants Michael Henk and Peggy Brinkmann discuss the risks of insuring TNC drivers as well as the new opportunities for innovation. Here is an excerpt:
One of the central ambiguities in ride sharing is the question of who pays when there is an accident… To answer the coverage question, it is helpful to break down the vehicle use into four different categories:
1) Ride sharing driver isn’t logged in to the ride sharing service and is thus not available for hire.
2) Ride sharing driver is logged in to the ride sharing service and is available for hire, but has not yet found a passenger.
3) Driver and passenger have confirmed a ride share and the driver is en route for pickup.
4) Ride share is in progress.
There is general agreement that accidents arising in the first category would be covered by the personal auto policy, but the second category has been more controversial…
Even insurers that are denying claims related to ride sharing are concerned about covering the personal usage of vehicles also used for ride sharing…
Without access to standard personal auto coverage, though, ride-share drivers are in need of new products and/or rating plans. Today’s typical rating plan varies rates by pleasure, work, and business usage, and mileage is difficult to capture accurately. To address concerns that the ride-share vehicle personal usage risk might be higher than expected under current rating plans, carriers could introduce a new variation of business usage for ride-sharing vehicles. Carriers could also perhaps require ride-sharing vehicles to enroll in usage-based rating programs in order to ensure the most accurate data about vehicle usage to get appropriate rates for the personal use of these vehicles.