App-based rideshare operators and the insurance industry squared off
Friday at a public hearing hosted by California Insurance Commissioner
Dave Jones.
Jones called the hearing to discuss the insurance issues related to a
type of business being referred to as Transportation Network Companies.
The hearing included testimony from TNC representatives, the insurance
industry and other stakeholders.
TNCs have become a hot topic, in part thanks to a perceived gap in
insurance coverage, and an incident during which a TNC driver under
contract with Uber struck and killed 6-year-old Sofia Liu. Her family
has filed a lawsuit against Uber. Uber issued a statement saying the
driver, 57-year-old Syed Muzzafar, was not responding to a fare didn’t
have a passenger in his car when he struck Liu.
Since then several states and local governments have been working on rules and regulations to oversee these emerging TNCs. The Seattle City Council passed a measure Monday that puts some regulations on rideshare companies that use smartphone apps to connect passengers with rides from drivers using their personal cars.
In California, TNCs are regulated by the California Public Utilities Commission, which offered up an initial set of regulations for such ridesharing activities late last year.
The hearing on Friday also included testimony by the general public,
including several representatives of the taxi industry, which has argued
that TNCs should be regulated like the taxi industry.
At issue between the TNCs and the insurance industry has been a gap
between when drivers are heading to pick up a ride or if they have a
ride, a period covered under the TNC’s typical $1 million commercial
insurance policies, and when TNC drivers have their app on and may be
seeking a ride.
The insurance industry had argued that the period when a TNC driver
has their app on but isn’t en route to pick up a fare or when they don’t
have a passenger should still be considered a livery activity, which is
excluded in most personal auto policies.
Uber said last week it now has new insurance to cover that gap between its personal and commercial policies when
drivers are using the app-based ridesharing service, while the
company’s CEO said the San Francisco-based firm is also working with
insurers to develop more insurance products to cover the activity.
TNCs Lyft and Sidecar followed suit and announced they plan to offer
similar coverages to fill the gap. All three TNCs have said that the gap
coverage will provide coverage when the app is turned one.
However, the insurance industry still isn’t satisfied and has been
working to ensure that TNC drivers’ personal insurance policies aren’t
relied upon for what many in the industry see as a commercial activity.
“The business model does try to shift the cost to the drivers,” said
Armand Feliciano, vice president of state affairs for the Association of
California Insurance Companies, calling TNCs and their insurance “a lot
like a square peg in a round hole.”
Feliciano and other insurer groups argued that TNC drivers log more
miles, they encounter more vehicular and pedestrian traffic and are
likelier to engage in riskier driving behaviors. They also argued that
TNC drivers may have multiple apps on while driving, which can be
considered a distraction, and if they happen to pick up a passenger who
may be in a hurry they could be encouraged to speed.
“Stop pushing this on personal insurance,” Feliciano said.
The Personal Insurance Federation of California and the American Insurance Association also offered similar testimony.
Some TNC representatives at the meeting suggested that personal
insurance companies could offer TNC drivers enhancements on their auto
policies, while several who testified said they have been having
difficulty finding insurers who will work with them to offer enhanced
coverage, and the industry as a whole hasn’t expressed a lot of interest
in the TNC business.
Geoff Mathieux, CEO of Wingz, which uses an app to enable to schedule
rides with other drivers, said the insurers who are offering coverage
seem to be pulling back.
“99 percent of insurance companies do not want to do business,” he said.
Wingz has a $1 million commercial liability policy similar to those held by Uber, Lyft and Sidecar.
According to Mathieux, Wingz’ policy has no exclusions, but if he had
to shop around he’s pretty much limited to his current carrier,
Berkshire Hathaway
“To my knowledge they’re the only company willing to cover TNC’s today,” Mathieux said.
Mathieux said James River Insurance Co., which is Uber’s carriers, Nautilus
and
Gemini have indicated to him they are getting out of the business and
don’t plan on offering renewals due to the uncertainty over rules and
regulations being created around the nation.
“I don’t know if in a year if there’s going to be anyone who wants to
do this because there’s so much ambiguity,” he said. “People who want
to be able to participate in this sharing economy … should be able to
pay for it on their personal insurance policy.
Representatives from the carriers couldn’t immediately be reached for comment.
Since this article was published, a representative from James River told
Insurance Journal the company wasn’t planning to exit the business.
“The fact of the matter is we’re not, we’re in it,” said John G. Clarke, James River’s senior vice president of marketing.
Clarke said the company wouldn’t comment on a specific insured or
program, and he declined to state whether the company was developing any
new programs for it client Uber or others.
John Zimmer, co-founder of Lyft, said right now there isn’t enough
interest from the insurance industry to offer competitive pricing and
develop innovative insurance products.
“There needs to be an insurance marketplace that’s available to address these things,” Zimmer said.
Zimmer and other TNC representatives at that meeting also argued that
prior to a match being made between drivers and their rides, the driver
could be doing other things that have nothing to do with looking for a
ride, such as running personal errand. In such cases their personal
insurance should cover them, he said.
Drivers could also be using multiple ridesharing platforms, which
means that driver would be covered under the insurance of several
different TNCs, the representatives said.
Beth Stevens, general counsel for Sidecar, referred to a “moral
hazard” created by this gap coverage if it becomes a requirement because
it creates potential for fraud if drivers get in an accident and want
to claim they have their app on when they in fact are using their
vehicle for personal purposes.
“These drivers are smart,” Stevens said. “They can quickly game the system.”
