“Ridesharing services, or transportation network companies (TNCs), are everywhere. Uber alone signs up an estimated 20,000 drivers each month worldwide. The service is particularly popular with millennials who appreciate the lower transportation costs and how easy it is to use the app from their phones.”
“You have a nice car and could use extra cash. You sign up to be a driver, install the app and soon you are driving people around and making money. Is it too good to be true?”
1) It isn’t “ridesharing”
Ridesharing is “the act or an instance of sharing motor vehicle transportation with another or others, especially among commuters,” which sounds more like carpooling and doesn’t involve a fee or contract.
2) How much does TNC insurance coverage really protect?
According to most TNCs, automobile liability insurance coverage is offered to drivers. As a driver, these policies allegedly become your insurance policies from the moment you get a fare until the transaction is closed, where coverage presumably reverts back to your personal auto insurance policy.
What does your personal auto insurance carrier say about this? You could have some coverage issues.
3) Your own insurance probably won’t protect you
TNCs require that drivers provide license, registration, and a copy of a current personal auto insurance policy. Your insurance policy doesn’t usually offer protection while you are working for a ridesharing service. Typical personal automobile liability policies exclude coverage for business conducted via personal vehicle.
4) Don’t ask, don’t tell
Don’t ask, don’t tell just might work if you don’t have an accident. If you do, you could lose your personal auto policy coverage for:
Failure to disclose. Check your policy for language just above the signature line that sounds like “any misstatement of warranty or fact on this application shall be considered a violation of coverage afforded under any policy issued on the basis of this application.”
Usage is important. Driving for a TNC changes not only the usage description of your vehicle, but also your exposure to accidents. Driving back and forth to work is significantly less exposure than driving around town for fares all day.
5) Make money or lose your shirt?
Inc.com did research on the time and effort required to earn a living wage working for a ridesharing service. They found that once you factored in insurance, fuel and maintenance charges, it takes a lot of rides to earn a solid wage. And these costs don’t take accidents into consideration. An accident while driving for a ridesharing company can reach deep into your wallet.
To drive or not to drive?
There are many pending insurance issues involving TNCs. California (among other states) as well as Germany, Thailand and other countries have issued cease and desist orders based on situations where TNCs have avoided taking responsibility for cases that involved injury, rape and death.
The insurance industry is also trying to catch up, but in the meantime there are huge gaps in coverage for TNC drivers. Until a hybrid or multi-use policy rolls out nationwide, drivers risk their personal auto insurance coverage and financial ruin well into their future every time they pick up a passenger. Insurance requirements may be on the way for ridesharing companies in Florida.
The sharing economy is still in its infancy and changing every day. Current and prospective TNC drivers must be wary of the assumption that these companies provide coverage.
Dean & Draper is a Trusted Choice insurance agency representing over 200 insurance companies. For over 35 years we have offered a trusted freedom of choice to our clients. ContactUs.