The conflict between the taxicab industry and ride-sharing services like Uber and Lyft has just taken a new turn. Taxi drivers and fleet operators feel threatened by the less-regulated startups, but now they're being joined by insurance industry trade associations, which are alleging Uber and Lyft’s convoluted insurance systems endanger riders, pedestrians, and drivers. Two bills are now up for approval in California (where both companies are based) that could force an overhaul in their insurance models—and result in higher fares for customers.
One thing is for certain: The way insurance works when you hop into a Lyft or Uber car is complicated. Both companies are classified, legally speaking, as transportation network companies (TNCs). As the State of California dryly puts it, they "provide prearranged transportation services for compensation using an online-enabled application or platform (such as smart phone apps) to connect drivers using their personal vehicles with passengers." While Lyft is a pure-breed TNC, Uber is a hybrid whose drivers use a mix of personal vehicles (UberX) and commercial limousines (Uber).
While the limousine drivers are covered by commercial insurance, UberX drivers are independent contractors. Uber offers those drivers non-primary umbrella coverage with $1 million coverage for driver liability, along with $1 million to cover uninsured or underinsured drivers.
But complicating things is the fact that Uber and Lyft offer two different insurance systems—one for when passengers are in the car, and another for when drivers are picking passengers up or looking for hails. During that time, as the infographic below illustrates, insurance coverage is far lower. Drivers are only covered for $50,000 injury, $100,000 injury total, and $25,000 in property damage. This means that when not driving customers, UberX drivers are primarily covered by their personal insurance—which can vary wildly depending on the state, municipality, and individual driver. Lyft’s insurance is similar as well.
Otherwise, both UberX and Lyft rely on the driver’s regular personal insurance.
The more important of the two bills now before the California state senate, AB 2293, would essentially dismantle the current two-tier insurance system for UberX and Lyft drivers. If enacted, AB 2293 would require both companies, along with other TNCs, to require taxi-like primary insurance and protect drivers against lawsuits for loss or injury when providing TNC services. Another bill, AB 612, being backed by lobbyists for the influential taxi industry, would require Uber, Lyft, and others to conduct mandatory alcohol and drug tests of drivers, and conduct mandatory background checks. Uber has sent emails out to California users asking them to fight the proposed bills.
Uber's Eva Behrend sent Fast Company a statement, in response to the bill requesting background checks, reading "Uber is providing the safest ride on the road with extensive background checks, annual vehicles inspections by certified mechanics, best-in-class insurance, transparency between riders and drivers, and a cashless experience that provides a greater ease and comfort for both drivers and riders." A similar statement was also issued for the proposed insurance bill.
Insurance industry lobbyists are supporting the California bills, which would inevitably mean a groundswell of new business for insurance agencies—while also giving drivers and passengers enhanced protection. But California is not the only place they’re fighting Uber and Lyft.
The Property and Casualty Insurance Association of America, an influential trade group, issued a statement during hearings in Buffalo, New York, which would ban operations by Uber and Lyft, alleging "serious insurance gaps" in operations by TNC services. Kristina Baldwin, a spokesperson for the organization, said that ride-sharing services’ insurance policies are "a source of confusion for drivers and passengers, who either erroneously believe that the personal automobile policy will provide coverage, or realize that it does not and are simply hoping for the best. This confusion is likely to result in costly coverage disputes and delayed compensation to accident victims."
Baldwin’s statement was highlighted by the Taxicab, Limousine & Paratransit Association (TLPA), a trade association representing the taxi industry. The organization is running an initiative called Who’s Driving You, which argues that companies such as Uber, Lyft, and Sidecar are a threat to public safety. Dave Sutton, a spokesperson for Who’s Driving You, told Fast Company that "before the advent of so-called ride-sharing, anybody who provided for-hire transportation in America was required to possess commercial auto liability insurance. These companies are attempting to provide taxicab service with the wrong insurance."
Paige Thelen, a spokesperson for Lyft, told Fast Company that "AB 2293 is very different now than before it passed, and the accepted amendments demonstrate there is no clear consensus about how best to determine appropriate levels of insurance for ride-sharing. The current version of AB 612 also looks very different than the original bill. We are continuing to work with legislators to ensure that consumers, drivers, and passengers have the ability to access safe rides from the Lyft community."
The odds are that both California bills will be approved in some form, barring last-minute victories by TNCs, which will serve as a precedent in other states. As dozens of Uber and Lyft drivers protested at California’s capitol earlier this week, the bills serve as perversely good news for both companies: They’re proof positive that ride-sharing services are now big enough to warrant government regulation.