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The world is becoming more connected in the digital age. Suddenly, almost everything is about sharing.
Not only are ride- and home-sharing services wildly popular, but on-demand deliveries of meals and packages as well as sharing of tools, clothing and even bathroom facilities when a portable toilet is unappealing are becoming ever more available.
The new message to the consumer seems to be, “Why buy and maintain when you can rent without responsibility?”
In general, three factors have driven the appeal and growth of ridesharing:
- Technology: Smartphones help the sharing economy to flourish by enabling virtually anyone with access to a smartphone to set up the platform that provides the capability to share a ride.
- Economics: People are always looking for creative ways to increase their incomes, and the sharing economy can help. Teachers might take the opportunity to supplement their income during summer months; young adults to pay college loans; and seniors to supplement their retirement funds.
- Convenience: In areas underserved by taxis, it’s simpler to connect with a rideshare driver after a night on the town than to wait by a curb for a random taxi to pass.
As a result, insurance agents must become familiar with not only the potential risks the sharing economy presents, but also the new coverage options now available in the marketplace for ridesharing activities. In addition, agents should know how those options coordinate with the coverage available from transportation network companies (TNCs) such as Uber and Lyft—otherwise, insureds may very well look elsewhere for the coverage they need.
Coverage is in the Timing
What’s unique about insuring ridesharing’s risks? After all, these drivers might be the teachers, young adults or retirees your agency has already been serving for years.
To better understand some of the potential coverage risks associated with ridesharing, you must first analyze the “periods” of ridesharing activities. In Period 1, a driver or policyholder is logged into a rideshare app but not yet matched with a passenger. In Period 2, the driver has matched with a passenger and heads off to pick them up. In Period 3, the passenger is inside a policyholder’s vehicle.
During all three periods, the exposure is not what the insurer may have contemplated when initially writing the risk for a personal auto. The rideshare activity may center on a city, airport or other territory not identified when rating the policy, and the number of miles the vehicle covers may be greater than originally anticipated at the time of underwriting.
Personal auto policies typically exclude this exposure because of the long-standing public or livery exclusion, designed to exclude coverage if a personal auto is used for the commercial purpose of providing taxi and other public-use types of service.
Because a commercial auto policy can cover taxi and other public-use vehicles, some insurers have generally taken the position that a commercial approach to ridesharing is appropriate and have decided to address the exposure accordingly. But others may not write commercial auto, and others still may prefer to serve rideshare drivers through personal auto insurer and agent relationships that already exist.
TNCs have reportedly made coverage available that reflects the model legislation developed by industry trade groups in relation to minimum levels of insurance coverage. Such model legislation, in part, requires drivers to carry specified minimum levels of coverage during the periods of ridesharing. Period 1 requires liability coverage up to limits of $50,000/$100,000/$250,000, with no requirement for comprehensive and collision. Meanwhile, Periods 2 and 3 require liability coverage and coverages for uninsured and underinsured motorists up to $1 million; comprehensive and collision must also be available.
Mind the Gaps
This coverage addresses most of the insurance needs a rideshare driver would reasonably require. But the lack of comprehensive and collision in Period 1 signals a potentially significant gap. And some insureds may prefer to have their own personal auto policy provide coverage whenever they use their vehicle, for ridesharing or otherwise. These insureds may also expect their policy to provide primary coverage for ridesharing exposure at the same limits that apply when using the vehicle for other purposes.
The good news is that personal auto coverage options are now becoming available to provide the primary coverage that some rideshare drivers are seeking from their own personal auto insurance. With TNC coverage available up to $1 million during Period 2, agents may wonder why an option providing coverage beyond Period 1 is necessary. Some insurers may be comfortable with accepting the risk up until the point a passenger enters the vehicle. This approach also avoids possible claims settlement delays with the Period 1-only option that may arise from difficulty in obtaining information about details such as whether the driver has matched with a passenger. The Period 1 and 2 option for coverage could help avoid such challenges.
In addition to understanding the coverage options available in the market, agents will need to identify applicants that are, or plan to be, rideshare drivers. Agents may also want to survey existing policyholders.
In the busy sharing economy—where the old rules may not always apply—the goal is to ensure an adequate share of coverage for all clients.
Jeff De Turris is vice president of operations and coverage products at ISO, a Verisk Analytics (Nasdaq:VRSK) business.