on July 20, 2014 by admin in Insurance Industry, Comments (0)

Insurance industry joins taxis in fight against Uber, Lyft

Travelers and bar-hoppers used to taxi to their destinations. Now many “Uber” to where they want to go.

This evolution from hailing a cab to apping for a Lyft has disrupted the taxi and limousine industries for the past two years.

Customers summon a car with a few taps on a smartphone. GPS-enabled maps make it easy for drivers and passengers to find each other. And no cash is exchanged — the fare is automatically deducted from a passenger’s credit card, which is linked to the app.

But the dirt-cheap fares of the ride-sharing services that appeal to so many patrons could be coming to an end as two Assembly bills that would regulate Uber, Lyft and similar services work their way through the state Senate.

AB 2293, sponsored by the vehicle insurance lobby, would force ride-share companies to provide commercial insurance for their drivers whenever they have the app on while AB 612, sponsored by the taxi industry, would require Department of Justice background checks and drug tests for drivers.

Currently, ride-share companies provide their drivers with $1 million of commercial auto insurance only after they accept a ride request or have a passenger. The companies also expect drivers to file claims with their own auto insurance companies if they get in an accident. If their policy has a clause that forbids commercial use, then the app company’s umbrella coverage kicks in.

AB 2293 would require $750,000 in commercial insurance coverage from the moment a driver turns on the app.

Critics say this arrangement allows ride-share companies to avoid the full cost of insuring their drivers because it shifts costs back onto insurance companies and, ultimately, raises premiums for others.

“It’s not fair for personal auto insurance drivers and companies to subsidize commercial activities,” said Steven Suchil, western region vice president of the American Insurance Association, which is co-sponsoring AB 2293.

Commercial insurance is more expensive because commercial drivers spend more time in their cars and tend to circulate in high-traffic areas, which is inherently riskier, Suchil said.

“It’s a whole different animal,” he said.

AB 2293 would be an expensive blow to the business model of Uber and Lyft, which rely on their drivers’ personal car insurance policies to subsidize their operating costs. Uber already has told its drivers to expect fares to increase by 7 to 10 percent in August.

The California Department of Transportation requires taxis to carry 24-hour commercial insurance. The same requirements do not apply to ride-share apps, which do not own vehicles and technically do not employ drivers, who are considered independent contractors.

Uber started in 2009 as an app that helped professionally insured and licensed limousine drivers find new clients. In 2012, the company launched its much cheaper UberX service, which, like Lyft and Sidecar, is classified as a transportation network company, or TNC.

Taxi owners in Southern California pay dues to Yellow Cap, a driver-owned co-op, that support dispatchers and administrators who vet and train new drivers.

In contrast, Uber adds tens of thousands of new drivers monthly without ever meeting them. The company says it performs “rigorous” background checks on all of its drivers, but an investigation by NBC in May showed that a convicted felon had no problem signing up.

Legislators started drafting stricter guidelines for TNCs after an Uber driver struck and killed a 6-year-old girl in San Francisco on New Year’s Eve. Uber has denied any responsibility, as the driver was not carrying a passenger and had not yet accepted a ride request at the time of the accident.

Uber and Lyft now provide some umbrella coverage during the period when drivers have the app turned on and are waiting for fares, although Uber is still in litigation with the family of the 6-year-old girl, whose medical bills totaled $185,000.


“A lot of drivers don’t understand that if they have an accident, their coverage won’t help them,” said Assemblywoman Susan Bonilla, who authored AB 2293. “If something really bad happens, they could be sued for everything they have.”

The Public Utilities Commission will vote in August on new guidelines that would require TNCs to provide $300,000 of injury and $50,000 of property coverage — the same minimum coverage required for Los Angeles taxis — when a driver is looking for a fare, but has not yet accepted a ride request.

In an emailed statement, Uber spokeswoman Eva Behrend said Uber supports requirements to insure drivers whenever the app is turned on, but the company feels AB 2293 “adds arbitrary state insurance requirements over and above what is currently required for any car on the road, including most taxis, during the period when no rider is in the car and no commercial activity is taking place.”

Lyft provided a similar response.

“While we support common-sense regulations that prioritize public safety, AB 2293 forces innovative new models into a one-size-fits-all regulatory structure with no basis in fact,” Lyft spokeswoman Chelsea Wilson said in an email.

The Public Utilities Commission says TNCs can pay for the insurance on their own or “in combination with a policy maintained by the TNC driver that is specifically written for the purpose of covering TNC services.”

However, this hybrid form of commercial insurance does not yet exist.

Article source: http://www.contracostatimes.com/news/ci_26182000/insurance-industry-joins-taxis-fight-against-uber-lyft

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