Despite being a news source for rail and transit, we assume that some of our readers own personal vehicles and, if they’re responsible (suckers), pay for auto insurance. Are those insurance premiums helping making Uber and Lyft profitable?
Generally, insurance works by pooling risk. A lot of drivers pay into a pool of money and, if one of those drivers has an accident, he can take money from that pool to pay for his losses. For the most part, the system works if the people in the pool have a similar exposure to the risk of an accident. So, a 17 year old boy or someone with a DUI conviction would be pooled with riskier people and pay more for insurance. Similarly, a commercial car driven 30,000 or 40,000 miles a year will be riskier than a personal vehicle driven 8,000 or 12,000 miles a year.
Now, we wonder, are drivers for car-sharing apps paying the same insurance rates as the typical driver? And, if they get into more accidents, is that fair to the other drivers?
The Bergen Record reported that “the Christie administration and Department of Banking and Insurance on May 27 issued a consumer alert saying drivers who haul passengers through networks such as UberX, Lyft and SideCar may not have adequate insurance coverage.”
Out in California, KQED reports that the ride-sharing apps want drivers’ personal insurance to pay first and then their insurance will cover any remaining liability. The issue has also arisen of whether the ride-sharing app should be liable if a driver is using the app but does not yet have a passenger in the vehicle. The San Francisco Business Times reports that a driver with the Uber app open struck and killed a child. The app argued that they were not liable because a passenger was not in the car. And that seems to be their stance, as they provide basic supplemental insurance for when the app is on but no passenger is in the car. This insurance only kicks in when the driver’s personal insurance is inadequate or their claim is denied.
That’s a gaping hole in coverage. It’s as if the driver is only on the clock with a passenger in the car, and that they somehow arrive at the pick up point by magic. Really, it’s more like they are commuting to work when they go to pick up a passenger, giving Uber drivers some of the longest commutes in the country. This is much in line with a lot of Silicon Valley’s move towards contracting everything. While this helps make human resources irrelevant (of which ratpag is hugely supportive), it neglects the benefits of stability and corporate responsibility. Remember those?
Different states have taken different approaches to regulating car sharing apps (whether the apps respect state regulations is a different article). Colorado has written more app-friendly laws, whereas the apps are less happy with proposed regulations in California.
To hedge our risk of writing a silly article, there is always the argument that car sharing will make the roads much safer. This article from the New York Times seems to show that taxis may be safer than personal vehicles, though TransAlt may disagree. And, of course, people may use a car service when they are intoxicated—and we all know that drunk driving causes a disproportionate number of accidents. More easily accessible car service may make the roads safer for everyone – they should just follow the same rules as everyone else.