If you haven’t heard about the drama that ridesharing companies Uber and Lyft are causing among insurers, regulators, and traditional taxi companies, it’s time to get up to speed. The outcome of the ongoing Uber battle could affect your ability to ring up a late-night ride—and your safety once you hop in the car.

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What’s Not To Love About Ridesharing?

You might be asking yourself this question if ridesharing services like Uber and Lyft have saved the day (or night) with a convenient ride at the touch of a smartphone button. Still, the ridesharing craze that has developed in the past several years hasn’t swept everyone off their feet and into an UberX. The success of young ridesharing companies has proved puzzling, if not frustrating, to several longstanding industries.

The key players in the ridesharing debate include:

Taxi Companies

Ridesharing services are direct competitors of standard cab companies, and pose a certain threat with their no-call-needed summoning and automatic payment. The SF Gate estimated that 65% of taxi traffic in San Francisco, the heart of the ridesharing movement, has switched to using services Uber, Lyft, and Sidecar.

“Uber likes to portray itself as an information provider (putting people together) and therefore falls outside the local, state, and federal oversight that traditional taxi and livery services are subject to,” explains Richard Roberts, District Manager of KW Insurance Agency, LLC. in Cambridge, MA. Taxis companies have called out this lack of regulation in defense of their industry, situating them on the same side of the debate as many legislators.

Insurers

Car insurance companies, too, are stumped by the question of how to navigate coverage for ride sharing companies and their drivers.

“The personal automobile insurance policy is not developed, priced, and does not react properly to the inordinate exposure that Uber exposes the driver and vehicle to,” Roberts says. “Uber subjects the vehicle, driver, and passengers to an exponentially greater rate than is associated with a standard personal use vehicle.”

Roberts notes that some ridesharing drivers avoid proper coverage to escape higher premiums, a practice that he warns could lead to “denial of claim, insurance fraud, and possible long term financial burden.”

Legislators

City and state legislators have responded differently to the huge increase in popularity of ridesharing services. Places like Portland, OR, denied Uber’s request to operate within city limits until recently, on the grounds that Uber’s services conflicted with taxi laws.

A recent tragedy in San Francisco brought the question of ridesharing insurance to the forefront of public concern in the Bay Area and beyond. The accident, in which an Uber driver struck and killed a child on New Year’s Eve, is forcing insurers and lawmakers alike to come up with answers and quickly evolve regulations.

California Law Paves the Way

In September, legislation was signed by California Governor Jerry Brown outlining new insurance terms for ride sharing companies like Uber and Lyft. Once the bill goes into effect next July, ridesharing drivers will be required to carry commercial insurance coverage of $50,000 per injury in an accident for up to $100,000, and up to $30,000 in property damage coverage when they are en route to pick up a passenger.

The bill specifically addresses this period of time when a driver has received a ride request (via an app like Uber) and is driving to pick up a passenger. Once a passenger enters the car, companies like Uber typically increase the insurance coverage $1 million to cover potential passenger injury and property damage. At all other times, when the driver isn’t using their car for ridesharing, the driver is covered by their own personal car insurance.

While the bill reflects a compromise between regulators and ridesharing giants, the final numbers are very similar to the ones that Uber and Lyft had already implemented. The Uber and Lyft websites explain the specifics of their ridesharing insurance policies.

Uber Lyft logosIs It Safe to Use Uber and Lyft?

Not all insurance companies agree on how to advise consumers when it comes to using ridesharing services, but there are several steps you should take if an accident occurs.

If you’re a passenger using a ridesharing service when an accident occurs, Roberts states that you should “get to a safe place and ensure you do the following at minimum:

  • Call the police
  • Obtain the drivers name, drivers license, insurance information for all vehicles involved in the accident (including the Uber vehicle you were in)
  • Document the date, time and location of the accident
  • Note the year, make, model, plate number, color of all vehicles involved (including the Uber vehicle)
  • Take pictures of all vehicles involved in the accident (including the Uber vehicle)
  • Seek any necessary medical attention
  • Call your insurance company and notify them of the accident and any injuries sustained”

Would My Personal Insurance Be Affected?

Even though ridesharing services have commercial auto insurance, Roberts says that in some cases, your personal auto insurance could play a role. “The likelihood is small,” he explains, “but there are situations that may arise in which you personal automobile insurance policy will need to be involved in the claim, and may payout for injuries you sustained.”

Could Ridesharing Change the Insurance Industry?

Despite the complication Uber and Lyft pose to traditional auto coverage policies, the insurance industry will have to catch up to the trend in order to cash in on its international following. With Uber operating in 45 countries, its trajectory is not set to slow anytime soon. Similarly to self-driving cars and other innovations, the technology of ridesharing has simply preceded its regulation.

Car insurers have some solutions already, including recently developed endorsements that explicitly exclude ridesharing from coverage. “Many uninformed individuals sign up for Uber and did not realize their insurance company would never cover such a risk and exposure,” Roberts says. “To ensure this information is clear, these Vehicle Ride Sharing exclusion endorsements are being added.”

Photo credit (top image): Derek Clark, Alfredo Mendez