Before hopping into an Uber or becoming a Lyft driver, you might want to ask yourself: What happens if I get in an accident?
As with many fledgling industries, peer-to-peer ride-sharing companies face an uncertain insurance landscape. Insurance coverage for ride-sharing users and drivers depends on state and local regulations. In some states, a driver’s personal auto insurance is voided when his or her car is used when transporting the public. Other states, California for example, have regulations recognizing peer-to-peer ride-sharing companies. California recently began recognizing “ride-hailing firms” as a new category of business called transportation network companies (TNC).
According to Bryant Walker Smith, a fellow at the Stanford’s Center for Internet and Society, the biggest issues ride-sharing companies is not how much insurance they should have, but whether or not they can even purchase insurance.
“The two biggest questions that we face are: Can these peer-to-peer ride sharing companies get insurance? And can the individuals get insurance?” Smith said. “Now there is a state-by-state standard. The trend has been towards greater acceptance by the government and the public. We are still trying to figure how much, exactly, can be shared.”
Since the ride-sharing companies face a heterogeneous regulatory environment, some companies are taking aggressive measures to influence policy by flouting laws and regulations. In addition to navigating regulatory issues, Walker also notes that insurance companies are still figuring out how exactly they can provide coverage to ride-sharing companies.
“Insurance companies are furiously collecting data,” he continued. “As Lyft and Uber cars operate more frequently insurers will need to analyze accident data. For example, they are collecting the incidence of accidents on a per mile basis. The insurer that is best able to understand that data and accurately price insurance premiums will find a lot of opportunity in a growing market.”
Collecting accident data is just one of many steps insurance companies need to understand ride-sharing insurance. As ride sharing grows, lawmakers, insurers and ride-sharing companies will need to address issues of liability. Lyft currently offers $1 million in excess liability insurance when drivers have passengers in their cars. Questions regarding Lyft’s liability in an accident are, however, mostly unanswered.
“Although Lyft and Uber are technically platforms that connect riders with drivers, they still might be liable if their drivers get in accidents,” Smith said. “It really depends on the state. There might be some cases where people can say these companies had knowledge or control of their drivers. Are they selecting the drivers? Are they inspecting the cars? Are they screening drivers’ history? Does the fact that drivers are constantly referring to their cell phones distract them from the road? We still don’t know how the answers to these questions might affect issues of liability. It’s a tough juncture of real-world risk and ongoing innovation. Injury and death can result. ”
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