Insurance Woes Plague Growth of Rideshare Firms

Rideshare companies are struggling to navigate the nuances of auto insurance policies, which currently leave drivers to rely on personal insurance in between rides.

While ridesharing companies like Uber, Lyft and Sidecar continue to expand their reach, the biggest threat to their success could be the mundane task of owning auto insurance. According to a report from Reuters, the nuances of insurance policies are preventing lawmakers from feeling comfortable having rideshares on the road — and one city even drove a company out of town.

The dilemma boils down to how, when and where drivers for a rideshare are covered by their employee’s auto insurance versus their own personal insurance. While companies like Uber have specific insurance that kicks in when a driver is transporting or on his way to a client, that policy does not cover accidents that happen while a driver is waiting to pick up fares. Worse, an auto insurance company can deny the claims that a driver makes while waiting for fares because ridesharing technically requires a commercial auto insurance plan — which costs up to five times more than a personal insurance policy.

It also adds a layer of complication in the way that victims and insurers find liability. For example, Uber maintains its claim that it was not liable for the New Years Eve death of a young girl in San Francisco, caused by a driver who was between fares but still logged in to the company’s app.

While it seems obvious that rideshare companies should just buy full-time commercial insurance for the fleet, the added cost of the new plan would almost certainly be passed down to the user. Rate increases and steeper surge pricing — a sore spot for Uber users in particular — could be even more damaging to companies.

Reuters says that Sidecar is researching a specialized insurance plan to mitigate the woes of insurance coverage without breaking the bank, but plans like those could take awhile to implement.