Why The Insurance Industry Is Taking Aim At Uber and Lyft

Ride-sharing companies are facing increased regulation—which could mean higher fares for their customers.

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.

Click to expandCourtesy of Uber

Otherwise, both UberX and Lyft rely on the driver’s regular personal insurance.

Click to expandCourtesy of Lyft

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.

[Image: Flickr user Andrei Daniel Țiclean]

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22 Comments

  • gary

    Rideshare companies like Uber and Lyft DO NOT Support the drivers, they abuse the drivers and the system. Drivers are lured in with the promises of incredible pay days and helping the community. In reality, once reeled in, the prices keep dropping to the point the drivers have to work endless hour and spend huge amounts of their income on gas.

    The drivers have enough burden, they need to supply thier own vehicle which gets thoroughly trashed in a year, they have to find insurance that covers them, they are more susceptible to accidents, and deductables can wipe out months of hard drives.

    Uber has not allowed an app based tip, and they charge drivers for the use of thier phone, which drivers don't want anyway.

    The least Uber and Lyft can do is cover their drivers as long as drivers have the app ON, not just on a ride. Do not support Uber or Lyft on this insurance isssue, they need to cover drivers.

  • Holly Sampson

    Lyft is awesome. I use it all the time. You can use promo code "FREE20" for a $25 credit. Cheers!

  • AB 612 would basically change TNC's into taxis which would not be a good thing. I'm rarely a fan of insurance but regulation is usually a good thing. In this case though, why are politicians ignoring the fact that people overwhelmingly prefer TNC's over taxis?

    I have never had a bad experience as a pax or a driver with TNC's and the same can definitely not be said about taxis.

    Btw, I just broke down Uber and Lyft's insurance policies in detail in my latest podcast: http://therideshareguy.com/the-rideshare-guy-podcast-episode-2-everything-you-need-to-know-about-uber-lyft-and-sidecars-insurance-policies/

  • Leonard Daneman

    Well put. Under the law, Uber and Lyft are operating a taxi/sedan service using independent contract carriers who are required by the states to have commercial insurance, for a limo (these cars are unmarked like limos) the required $1 million liability is about $250/month. The drivers are also required to have chauffeur's licenses. So, right off the bat they are operating illegally. The purpose of a Public Conveyance Company is to apply to the state for a 'franchise,' or Certificate of Authority to operates as such in a specific territory. The investment required and regulation compliance necessitates only a limited number of companies can operate in a territory. This is called 'limited protected territory,' essential in a franchise contract; and is not 'monopolies' as Lyft, Uber, and their lobbyists tout to legislators and the media. Lyft and Uber 'hide' in the Internet to avoid prosecution, and therefore fail to staff local compliance office workers.

  • Keith West

    Why do you think regulation is usually a good thing? Most regulation is at the behest of established businesses trying to limit competition. It is always couched in terms of "protecting the consumer". Regulation always means higher costs and fewer options. You only have to see who's pushing these regulations to see the truth.

  • Leonard Daneman

    See my comment to Rideshare Guy. It is a limit to competition, but in the form of a 'limited protected territory.' Taxi franchises could not exist, nor any franchise, if their investment servicing the territory could be diluted in an open market. For example, I have a website, taxiabq.com, that tracks taxis. If I opened the tracking maps up to any driver, for a mere $40/month, I could make a lot of money hardly working, and put a couple cab companies out of business. It is not because I have a better business model, but because I am avoiding regulation compliance.

  • sbobes003

    So, you have actually seen the Lyft policy, that they claim is a trade secret, and actually viewed the exact terms under which there is or is not coverage?

  • Honestly it makes sense that they don't reveal the whole policy but that is another argument. They post the info right there on there website, what is their incentive to lie to drivers? They are in this for the long run, clearly you didn't listen to my podcast :)

  • smojica1904

    well long story short i didnt get jack for coverage for my medical bills. i suffered alot. still am and yet it sucked and it was a bad experience im not super pissed, like this message thats being brought about sounds like. hey you got let go because of some jack o mole wanted to ruin ur day. and they did. but are you going to continue to rant on through life stuck on that same issue. no your gonna jump on that bike and ride it again. !! or horse, whatever. apply for a different service, or get certified like men do, or become a washed our limo driver, i.e. Taxi driver! lol see what i did there. nah this has been great. im just messing, have a good day!

  • smojica1904

    Im no proprietor of this. i was doing some research and saw this actually. but it just seems like you can still notify the customer when you get to the point of destination. or be at a stopping point before you start accepting fares. i mean you dont have to do this while your driving thats just silly if you can stop for a few minutes out of your life just to be a lil safer. i mean work smarter not harder. next i want to say that taxi drivers dont give you anymore coverage than whats being said here that your being covered by uber or lyft or what ever company is out there. next there man be a law on how long taxi drivers can drive but honestly ever time i step into a cab hes strung out and looks like hes been up for days. so you know what i do now. i ask him to stop, i pay the fare, and i take a different means home. I learned my lesson after personally being in a taxi at the time of an accident and he fell asleep at the wheel and slammed into a flatbed truck. this was yellow cab.

  • Lucas Laramie

    Re : Uber ( REVISED ) I drove for Uber for slightly under two months and here’s what I found………….Uber is dangerous for public safety and must be shut down . Having to tap a small icon on the Uber device ( phone ) to accept, cancel, arriving, etc., and more takes your eyes completely off of the road . You are oblivious to traffic for those few seconds your looking at your Uber device which can easily cause accidents resulting in immediate death & injury . Even if you, yourself cancels the fare you must proceed with why you are cancelling to the little green icons on your Uber device and doing so is a distraction, period . There are 6 icons on your Uber device requesting why your cancelling & you must select one by tapping on one of the icons . This is frequently done while driving diverting your eyes off the traffic ahead of you and this happened often ….. the client will cancel for one reason or another . I received the cancellation notice while I was driving and while I was driving my eyes were taken off the road so I could respond to the beeping sound coming from my Uber device . This beeping sound indicates that the client has cancelled the fare . When getting close to the pick up location while driving you are required to notify the client by again having to locate your Uber device ( some of the drivers keep it on their lap ) then tapping on an “ arriving “ icon. This is more dangerous then texting . Furthermore, there is no time limit to driving . Unlike Taxi drivers who are limited to a ten hour driving period in, San Francisco an Uber driver can drive for 20 hours straight or more . Too much driving creates fatigue often leading to confusion, , falling asleep, hallucinations, dozing off and considerably more inattentiveness which can cause accidents resulting in injury and even death . Being an Uber driver means you are subjected to violating laws ( that were put there for public safety ) such as take eight passengers in your car when there are only four seat belts or you will be FIRED by Uber . In my case I got a call to take nine passengers, including myself that which would have been ten people total all in a mini van . The weight itself is enough to cause my tires to rub against the wheel wells of my van creating sparks from stones trapped in the threading of my tires which could ignite the fuel tank causing an explosion even killing all those passengers that are trapped inside my mini Van . It was dangerous . That much weight often causes unintentional swerving resulting in another accident with more deaths or injuries . Because I didn’t take all nine passengers out to, Isla Vista from downtown Santa Barbara and only took the legal amount of five ( six including myself ) the passengers gave me a one rating . So, over safety concerns I was FIRED by Uber from driving for doing what was lawfully right and after I explained to my, Santa Barbara – Uber representatives via email numerous times about having to take too many passengers creating unsafe driving conditions so I could be reinstated my request was ignored . You are rated after each fare by your passenger(s) from one to five and if your rating is too low you will be FIRED . This causes drivers to violate the law in order to maintain a high rating or their driving privileges with Uber will be suspended . So, refusing to take all nine passengers ( 10 including myself ) because it is unlawful , dangerous and of a safety concern to your passengers and yourself is a reason a driver will be FIRED . This means failing to run red lights at customer request means you will be FIRED by Uber . There are no vehicle inspections required by Uber drivers meaning if your car’s brakes are failing or wipers not working it’s still OK to drive in the rain . Does Uber care your brakes are failing or wipers aren’t working ? Probally not . They just want their 20% share of your fare and will claim no responsibility if your involved in an accident because they will say your an independent driver . Then if a claim is put against the driver’s insurance Company that claim will be denied because you were using the vehicle commercially . It is illegal to use your vehicle commercially unless you get commercial registration and insurance . Uber drivers do not have commercial insurance and probally most don’t get commercial registration for their vehicles or the proper insurances so driving commercially for Uber is technically illegal . Not getting commercial plates and insurance means the loss of millions of dollars for all States .

  • Lucas Laramie

    Revised . Re : Uber I drove for Uber for slightly under two months and here’s what I found………….Uber is dangerous for public safety and must be shut down . Having to tap a small icon on the Uber device ( phone ) to accept, cancel, arriving, etc., and more takes your eyes completely off of the road . You are oblivious to traffic for those few seconds your looking at your Uber device which can easily cause accidents resulting in immediate death & injury . Even if you, yourself cancels the fare you must proceed with why you are cancelling to the little green icons on your Uber device and doing so is a distraction, period . There are 6 icons on your Uber device requesting why your cancelling & you must select one by tapping on one of the icons . This is frequently done while driving diverting your eyes off the traffic ahead of you and this happened often ….. the client will cancel for one reason or another . I received the cancellation notice while I was driving and while I was driving my eyes were taken off the road so I could respond to the beeping sound coming from my Uber device . This beeping sound indicates that the client has cancelled the fare . When getting close to the pick up location while driving you are required to notify the client by again having to locate your Uber device ( some of the drivers keep it on their lap ) then tapping on an “ arriving “ icon. This is more dangerous then texting . Furthermore, there is no time limit to driving . Unlike Taxi drivers who are limited to a ten hour driving period in, San Francisco an Uber driver can drive for 20 hours straight or more . Too much driving creates fatigue often leading to confusion, , falling asleep, hallucinations, dozing off and considerably more inattentiveness which can cause accidents resulting in injury and even death . Being an Uber driver means you are subjected to violating laws ( that were put there for public safety ) such as take eight passengers in your car when there are only four seat belts or you will be FIRED by Uber . In my case I got a call to take nine passengers, including myself that which would have been ten people total all in a mini van . The weight itself is enough to cause my tires to rub against the wheel wells of my van creating sparks from stones trapped in the threading of my tires which could ignite the fuel tank causing an explosion even killing all those passengers that are trapped inside my mini Van . It was dangerous . That much weight often causes unintentional swerving resulting in another accident with more deaths or injuries . Because I didn’t take all nine passengers out to, Isla Vista from downtown Santa Barbara and only took the legal amount of five ( six including myself ) the passengers gave me a one rating . So, over safety concerns I was FIRED by Uber from driving for doing what was lawfully right and after I explained to my, Santa Barbara – Uber representatives via email numerous times about having to take too many passengers creating unsafe driving conditions so I could be reinstated my request was ignored . You are rated after each fare by your passenger(s) from one to five and if your rating is too low you will be FIRED . This causes drivers to violate the law in order to maintain a high rating or their driving privileges with Uber will be suspended . So, refusing to take all nine passengers ( 10 including myself ) because it is unlawful , dangerous and of a safety concern to your passengers and yourself is a reason a driver will be FIRED . This means failing to run red lights at customer request means you will be FIRED by Uber . There are no vehicle inspections required by Uber drivers meaning if your car’s brakes are failing or wipers not working it’s still OK to drive in the rain . Does Uber care your brakes are failing or wipers aren’t working ? Probally not . They just want their 20% share of your fare and will claim no responsibility if your involved in an accident because they will say your an independent driver . Then if a claim is put against the driver’s insurance Company that claim will be denied because you were using the vehicle commercially . It is illegal to use your vehicle commercially unless you get commercial registration and insurance . Uber drivers do not have commercial insurance and probally most don’t get commercial registration for their vehicles or the proper insurances so driving commercially for Uber is technically illegal . Not getting commercial plates and insurance means the loss of millions of dollars for all States .

  • Lucas Laramie

    I drove for Uber for slightly under two months and here’s what I found………….Uber is dangerous for public safety and must be shut down . Having to tap a small icon on the Uber device ( phone ) to accept, cancel, arriving, etc., and more takes your eyes completely off of the road . You are oblivious to traffic for those few seconds your looking at your Uber device which can easily cause head – on collisions resulting in immediate death & injury . Even if you, yourself cancels you must proceed with why you are canceling to the little icons on your Uber device and doing so makes you oblivious to traffic and the road ahead of you while driving . There are 6 icons on your Uber device stated on you why your cancelling & you must select one by tapping on one of the little icons . This is frequently done while driving diverting your eyes off the road ahead of you . You are not paying attention to traffic while your concentrating on these little icons on your Uber phone. When driving to get to the the client ( this happened frequently for me ) the client cancels for one reason or another . Because your on the way to pick up your client you receive the cancellation notice while your driving and while your driving your eyes are taken off the road so you can respond to the beeping sound coming from your Uber device . This beeping sound indicates that the client has cancelled the fare . While driving, searching then tapping the icons is more dangerous then texting . Furthermore, there is no time limit to driving . Unlike Taxi drivers who are limited to a ten hour driving period in, San Francisco an Uber driver can drive for 20 hours straight or more . Too much driving creates fatigue often leading to confusion, , falling asleep, hallucinations, dozing off and considerably more inattentiveness which can cause accidents resulting in injury and even death . Being an Uber driver means you must do illegal or unlawful things such as take 8 passengers in your car when there are just 4 seat belts . In my case I was required to take 9 passengers, including myself which would have been 10 people all in a mini van . The weight itself is enough to cause my tires to rub against the wheel wells of my van creating sparks from stones trapped in the threading of my tires which could ignite the fuel tank causing an explosion even killing all those passengers that are trapped inside my mini Van . Another example : That much weight often causes unintentional swerving resulting in an accident .

    After I complained to my Uber representatives via email numerous times about having to take too many passengers creating unsafe driving conditions i received absolutely no response and getting zero response from other Uber drivers complaints may encourage these drivers to do unlawful and dangerous things . If you refuse to take all 9 people when there are only 6 seat belts the clients ( in my case were upset ) gave me a “ one “ rating and if your rating is too low you will be blocked from driving which is what happened in my case . You must also drop drivers off at the designated location the client(s) request creating the impeding of traffic & the sudden slamming of your brakes so you won't miss the client(s) destination . Again if you don't you will be graded on your performance from 1 to 5 and in most all cases you will be given the lowest rating such as a “ one “ and you will be blocked from driving . So, refusing to take all nine passengers ( 10 including myself ) because it is unlawful , dangerous and of a safety concern to your passengers and yourself is a reason you will be FIRED .

  • stew21451

    there were once two things for certain according to Benjamin Frnaklin, death and taxes, if he were alive today? I am sure he would ammend it to three things, adding insurance.

    The village idiots at uber and lyft thought that no one would notice and nothig would be said about it?

    we call it #playbytherules.