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Carriers Expanding Offers of Insurance Quotes for Ridesharing Drivers

April 30, 2015
Auto Insurance, Insurance
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Since their introduction, ridesharing companies like Lyft and Uber have given insurance carriers the willies. Contracted drivers have had a tough time getting accurate quotes for rideshare insurance, often having to choose between lying to their personal insurer and having their coverage canceled. Critics — including many legislators — have also said that insurance for rideshare drivers doesn’t provide enough coverage.

Lyft, Uber and their drivers still have many hurdles to clear. But recent developments suggest that governments and insurance companies are coming to terms with ridesharing.

In many states, legislative battles continue

Many states, including Nevada, Wisconsin and New Jersey, are still debating Uber, Lyft and their competitors on ridesharing regulations. Lawmakers are disturbed by the “coverage gap,” which occurs when a driver is signed in to the app but not carrying a passenger. Insurers and ridesharing companies often disagree about who should pay claims during this period, leaving drivers in the lurch. If a ridesharing company does agree to pay for damage incurred between passengers, the maximum liability accepted by the companies is $100,000, compared with $1 million when a paying passenger is in the vehicle.

Some legislative proposals would make ridesharing companies responsible for damage from the time the driver signs in to the app, and they would require higher liability limits once the driver accepts a ride. Ridesharing companies say that adding such coverage would be too expensive, and that they already offer more coverage than traditional cab companies.

Legislators in Nevada are weighing bills specific to Uber and Lyft, separate from those that apply to cab companies. If passed, the measures would raise insurance requirements while drivers are signed in to the app, as well as strengthen driver background checks and passenger data privacy.

Wisconsin is considering a similar bill that would also require ridesharing drivers to apply for a $5,000 state-issued license and override cities’ specific ordinances.

New Jersey’s version adds a 10-cent fee, paid to the state, for each ride one of the companies provides. If passed, the legislation would drive Uber out of New Jersey, company spokesman Matt Wing said, according to website NJ Spotlight.

Other states have passed laws regulating ridesharing

Other states, such as Georgia and Idaho, have joined Colorado, California and Virginia in passing measures on ridesharing.

Georgia’s House of Representatives approved legislation in April that would extend Uber’s $1 million coverage to drivers who had accepted a fare but not yet picked up the passenger.

By contrast, Idaho’s bill allows Uber and Lyft to regulate themselves in the state, without interference from lawmakers.

Insurance companies continue to offer new ridesharing products

Earlier this year, Erie, USAA and Geico announced pilot programs to offer affordable ridesharing insurance policies that erase ambiguity during the period of the “coverage gap.” Now more insurers are starting their own pilots, and existing programs are being expanded, giving ridesharing drivers more choices for auto insurance quotes they can trust.

Geico launched its ridesharing program in Virginia and has expanded it to drivers in Maryland. In May, USAA’s ridesharing plan will be available in Texas, as well as its initial market of  Colorado.

In March,  Progressive announced an exclusive program for Pennsylvania Lyft drivers; Uber drivers can’t sign up. MetLife now has a similar program for Lyft drivers in Colorado. Drivers in Colorado also have a third option, a new policy from Farmers Insurance.

In March, Uber and Lyft also reached an agreement with a collection of the country’s largest auto insurance companies (including State Farm and Allstate) and insurance trade groups that clarifies when ridesharing companies will cover accidents and when drivers’ insurance is responsible. The agreement should provide guidance for future legislation and ridesharing insurance policies.

Despite progress in many markets, Uber and Lyft are still fighting for government acceptance in many U.S. states and cities, and in others internationally. A few large U.S. markets — including Las Vegas and Portland, Oregon — are still closed to the companies, though approval legislation is pending. In the meantime, Uber and Lyft, governments and insurers do seem to agree on one thing: Ridesharing’s spread is inevitable.

Alice Holbrook is a staff writer covering insurance and investing for NerdWallet. Follow her on Google+.

Image via iStock.