RIDESHARING: The Emerging Risk (Opportunity)

There’s a new phenomenon getting mass attention from lawmakers, news stations, cyberspace and insurance professionals. “Ridesharing”- is taking the nation, and the world, by storm.

According to the Insurance Services Offices (ISO), “Ridesharing” is a term referring to a peer-to-peer service that enables the arrangement of vehicular transportation services, often on a short notice generally utilizing smart phone applications. Ridesharing is an impromptu taxi service.

Many ridesharing companies allow you to request a selection of vehicles from a Chevy to Mercedes. Another appealing aspect is they can be less expensive than using a traditional taxi service. They tend to arrive on shorter notice and are available for summons via a smart phone app.

The main difference between TNC’s (Transportation Network Companies) and taxicabs are that the taxi has earned certification or paid for it from its municipality. Taxi drivers also have experience transporting passengers and are required to maintain their vehicles to a certain standard. These factors do not always apply to driver’s working for TNC’s.

For drivers engaging in providing services via TNC’s the discrepancy is a gap in coverage between the driver’s Personal Auto Policy and the coverage provided by TNC’s commercial policy. Private passenger auto policies have an exclusion that denies coverage when using a personal automobile for any kind of livery service. This includes, but is not limited to, using a personal automobile as a taxi.
The two major players in the TNC arena, Uber and Lyft, have teamed up to provide coverage with the excess and surplus lines insurance carrier, James River. The coverage has three major sections:

• A $1 million liability coverage limit that drops down from the moment the driver accepts a rider on the smart phone app to the moment that rider is dropped off at their destination. In the event that coverage is declined by the driver’s Personal Auto Policy (which would likely occur due to the livery exclusion) the James River policy would step in to provide coverage from the first dollar.
• The next coverage part provides a separate, lower limit while the driver is logged into the app but waiting to be dispatched to pick up a rider.
• The final coverage provides physical damage protection to the driver’s vehicle while operated for ridesharing purposes.

These unique coverages created to address the exposure of the ridesharing phenomenon are the first of its kind- but certainly not the last.

No matter how it’s viewed, it is undeniable that the global phenomenon known as ridesharing has made its emergence and will be here for the foreseeable future. The insurance pitfalls are varied and wide. Your insurance agent needs to be consulted if you are involved in any ridesharing activities as a driver and as a passenger.

Author: Kevin Brooks, Personal Insurance Account Executive

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