Insurance for an ‘Uber’ world

In November of 2014, the San Francisco Chronicle published quotes from leaked Geico internal documents encouraging insurance agents to refer policy holders who drove for Uber or Lyft to the fraud department. A script for agents directed them to explain to drivers that their personal policies didn’t cover commercial driving and to look elsewhere for policies that did.

The article quoted a ride service driver who had been asked by Geico when his policy was up for renewal to fill out a form asking whether he worked for any on-demand ride providers. His response: “I didn’t sign it because I didn’t want to lie. Instead I signed up with another company.”

That shows how, in the nascent but booming sector, serving drivers for Uber, Lyft et al. – transportation network companies or TNCs – could be a competitive advantage for insurance companies, with a potential for tens of thousands to millions of new customers or new endorsements to existing policies.

Geico thinks so. Just three months after the document leak, on February 4, 2015, Geico announced a rideshare policy that would replace a driver’s personal policy with a hybrid one covering both personal and paid-fare driving. It was first available in Virginia and has since extended to several other states on its way to becoming a national product.

UBI provider Metromile and Uber formed a partnership in January that integrated Metromile’s dongle-based insurance product with the Uber platform, so that drivers can easily subtract the miles when they’re covered by Uber’s insurance from total miles driven and then pay Metromile for the difference. The product is only available in three states so far.

To date, Metromile is the only insurer that has integrated with Uber’s app, giving it a potential edge in getting new business from the market-dominant TNC, which accounted for 45% of all business car rides in Q1 2015, according to Certify.

However, three quarters of all TNC drivers work for both Uber and Lyft, according to SherpaShare, a platform that helps drivers track mileage, expenses and earnings. Metromile refused an interview but as drivers begin to shuffle among TNCs and delivery services such as DoorDash, it’s hard to see how the partnership would provide competitive advantage in a marketplace where there are several insurance options for drivers.

By now, according to the online blog, The Rideshare Guy, 14 states have approved insurance products to cover drivers for transportation network companies and more and more insurers are getting into the game. And that levels the field again.

With more options for drivers for what are more correctly known as transportation network companies, the decision on which insurer to choose “will be similar to why you choose an insurance carrier in general,” says Mariel Devesa, leader of product innovation for Farmers Insurance. It began offering its Rideshare Coverage endorsement in Colorado on February 16.

New models for a new economy

Insurance regulators demanded that TNCs provide insurance coverage for their drivers but the devil is in the details.

In a March 2015 report, the National Association of Insurance Commissions said that the ideal insurance solution would be for TNC drivers to have coverage for all activities, either by purchasing a commercial insurance policy or by the TNC providing coverage for all three periods. Neither drivers nor TNCs like that idea, because this ideal solution would cost one of them more money.

TNCs have insisted that they’re not obligated to insure drivers during what’s become known as period one, the time when a driver has the TNC app open but has not accepted a ride. (Period two, when a driver has accepted a fare through an app, and period three, when the driver has picked up the passenger, are not in dispute.) There’s validity to this approach because many drivers have more than one TNC app open at once, ready to take the first and/or best fare offered.

Geico’s approach was designed to eliminate hassles and the confusion about which period a driver is in and which policy is primary. According to the company’s press release ‘The insurance applies whether or not the app is on and whether or not you have a passenger’. Nor is it limited to just one transportation network company. Farmers Insurance also is an extension to the personal insurance that covers work for any TNC.

A role for telematics

Telematics plays only a small role in most of the early insurance products for TNC drivers, relying on smartphone apps to track and timestamp mileage. For example, if a driver with Farmers Insurance Rideshare coverage gets into an accident and makes a claim, Farmers will call the TNC to identify the period in which the accident took place in order to determine coverage, according to Devesa.

There is huge opportunity for fraud in this kind of system, says Chris Carver, president of ATG Risk Solutions. For one thing, many drivers who don’t have TNC coverage make claims against their personal insurance when they have an accident while providing taxi service. Drivers may also be tempted to make claims against whichever TNC provides the best coverage when more than one app is open during period one.

Carmakers are considering providing connected-car data directly to insurers or via data exchanges, and this could help insurers determine which policy was primary at the time of an accident. See Cutting in the middleman for data handling

ATG is proposing an opt-in system that, as part of its Telematics Data Clearinghouse that would let insurers check to see whether a claimant’s vehicle was associated with a TNC but Carver would not disclose details.

He notes that because TNCs are so new, it’s difficult for insurers to accurately rate these drivers. Are they safer because they drive more and like driving? Or are they riskier because of all those extra miles, to say nothing of the distraction of keeping an eye on their apps? That’s something else that telematics – and time – might tell.


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