Mon, 03/14/2016 - 09:26
To say that the shared economy is having its day is an understatement. The smartphone-driven phenomenon of peer-to-peer sharing of goods and services has already made waves in the ride hailing and travel industries. Other industries, from education to logistics, aren't far behind.
Just look at the rise of Uber, which is now a $62.5 billion company. Each statistic for the taxi rival is more startling than the next--8 million users, 160,000 drivers, 1 million rides a day. Uber's billionth trip took place on Christmas Eve 2015. Airbnb was recently valued at $20 billion, and it's affecting the travel industry at every level.
Hundreds of thousands have signed up to be drivers or listed their homes for rent, and many more have downloaded the apps and started using the services. While millions signed up and the companies grew, insurance seemed to be an afterthought, leaving producers, underwriters and adjusters on the front lines to tackle real-life claims and attempt to accurately write the risk using specific policies and coverages.
As a result, the insurance industry is well aware of the changes the sharing economy will bring, especially when it comes to auto coverage and claims: when The Institutes surveyed insurance professionals on The Community about the #trends that would have the biggest impact on the industry in 2016, #ridesharing came in at number two, behind only cyber security.
Where the Industry Stands Now
Insurance for ridesharing drivers is all about timing. Ridesharing companies and insurers agree that there are three periods a driver may be in:
- Period 1: Driver has the app (Uber, Lyft, Rideshare, etc.) open but has not been matched with a rider
- Period 2: Driver is in en route to pick up a matched rider
- Period 3: Driver has picked up the rider and is driving to the destination
When drivers operate a vehicle for personal use without the app open, their personal coverage is in effect--they're just like any other driver. Once a driver has been matched with a passenger, the ridesharing company's insurance normally kicks in--up to a certain point. But it's period 1 that causes havoc for insurers and drivers alike.
Companies like Uber and Lyft offer contingent coverage in most states with limits of 50/100/25 for drivers in period 1. As many drivers are discovering, it's not uncommon for claims to be denied or even to have coverage dropped once they tell their insurer that their personal auto is being used to make money.
Ridesharing companies provide coverage during periods 2 and 3 but with some pretty significant limitations. Comprehensive and collision coverage are contingent, and the deductible for Uber is $1,000. Lyft clocks in at an even pricier $2,500.
By comparison, Airbnb offers Host Protection Coverage, which the company defines as primary liability coverage for up to $1 million per occurrence in the event of third-party claims for bodily injury or property damage.
Insurance Gets in the Game
Until recently, the only other coverage option for ridesharing drivers was commercial coverage, which can easily run $5,000 or more a year, taking a big chunk out of the extra income drivers are so excited to earn.
But more and more insurers are crafting rideshare friendly policies. For example, late last year, ISO introduced two new optional endorsements to the Personal Auto Policy that "buy back" coverage for transportation network drivers. The most advantageous of these is the PP 23 41 10 15 Transportation Network Driver Coverage (No Passenger) endorsement. This endorsement--and others like it--cover drivers during that period 1 gap at a fraction of the cost of a commercial policy. It's an essential first step but can still be confusing for agents and drivers; policies vary and are only available in certain states.
Agents: Ask Questions, Have Answers
Armed with better coverage options, agents have a fair shot of getting a good policy in front of a prospective client or someone looking to add coverage when it comes to ridesharing. It's a significant market. More than 90 percent of drivers say that they don't have insurance that specifically covers ridesharing, and more than 80 percent of people say that they want a policy that covers it, according to an ongoing poll posted at therideshareguy.com.
States change the regulations covering the shared economy all the time, and providers update their coverage options in an effort to keep up. Add to these complications the fact that prospective clients aren't always forthcoming about their ridesharing and renting activities, and the whole thing can become quite a headache.
Here are three broad steps agents can take to better navigate the murky waters of insuring the shared economy:
- Keep up with state law and provider coverage. Make sure that you know the specific requirements in your state and how shared economy legislation is changing, as well as coverage options available through your providers. Keep up with evolving regulations through your provider or at a site like this. (Though aimed at drivers, it regularly updates insurance options.)
- Ask direct questions. Whether a new client is signing up for coverage or a current customer calls to report a claim, it's important to ask directly about shared economy activities: Will you rent your home through Airbnb? Did the car accident occur while you were engaged in a ridesharing service? When you ask direct questions, you're much more likely to get honest answers.
- Provide answers. Insurance can be frustrating for shared economy participants. As the poll results above suggest, many people want the necessary coverage. Focus on giving direct answers to questions like, "Will my coverage be dropped if I file a claim for an accident that happened while I was engaged in a ridesharing service?" or "Will my claim be denied if the incident occurred while I was renting my home through Airbnb?" The answer may not be what the client wants to hear, but it will prevent issues for both sides in the long run.