Insurance gap could threaten the future of ride-share companies as they continue to juggle financial risks and liability issues
Ride-share companies are becoming more popular and they are beginning to feel pressure to address the insurance gap problem they have. The insurance gap has the potential to threaten the future of ride-sharing and if companies cannot find an effective way to address the issue, they may find it difficult to continue operating in some states. The problem stems from the relative youth of the ride-share sector. Because ride-sharing is so new, it does not fit well into traditional auto insurance classifications.
Ride-sharing does not fit into the traditional insurance structure
Commercial auto insurance typically covers limousine and taxis, as well as similar vehicles used for transportation purposes. This coverage protects both drivers and their representative companies from liability issues. Ride-share drivers, however, are considered independent contractors, which means that they do not benefit from traditional auto insurance policies that have been used in the commercial transportation space for years.
_________________________Random Quotes to Remember ~ “The best investment is in the tools of one’s own trade.” – Benjamin Franklin
Policies offered by ride-share companies may fall short in some cases
Many ride-share drivers have to rely on personal auto insurance policies, which are not designed to account for the risks they face while working. In order to resolve this issue, ride-share companies, like Uber and Lyft, offer their own insurance policies to their drivers. In some circumstances, however, these policies may not be able to account for the risks that drivers face while operating their vehicles.
Policies are only in effect when transporting passengers and not while drivers are waiting for a client
Notably, the insurance coverage that Lyft and Uber make use of is sufficient enough to cover the risks associated with transporting a passenger. In Uber’s case, the company’s policy covers up to $1 million in liability for uninsured and underinsured motorists, which is enough to cover virtually any car accident. Problems emerge when ride-share drivers are not transporting passengers. These policies are only in effect when a driver is actually transporting someone, and not before. As such, there may be a significant and costly gap in insurance coverage.