Why Insurers Are Driving Into Rideshares, Despite Speed Bumps in Coverage

Auto insurers already feared the concept of the rideshare: How would they cover the drivers when the app was on or off? And what if there was a passenger or package in the vehicle at the time of the accident?

But there’s another less noted concept bringing caution to the wind: Rideshare drivers are accepting cash for rides — turning the rideshare app off in the meantime — leaving the question of who is held responsible in the event of an accident open-ended.

In the case of a rideshare driver who leases the vehicle, this could leave the captive stuck with both the damages and a delinquent borrower.

“Different companies have different policy terms and conditions so there is no blanket statement that can handle absolutely everything,” James Lynch, chief actuary and vice president of research and information services at the Insurance Information Institute, told Mobility Finance. However, in this particular circumstance, the driver itself would be held liable — if his or her personal auto insurer discovered the driver was using the vehicle for commercial purposes, even if the ride-hailing app was not active at the time.

“Insurance companies — because of the growth of ridesharing — have become very sensitive to when a person is conducting a ridesharing business,” Lynch said. “They are much more likely to investigate that [situation] if the circumstances seem to warrant it.”

For example, the insurance company will investigate whether the people riding in the car are strangers to the driver, and whether or not there is someone sitting in the backseat, but not next to the driver. These are all cause for the insurer to believe the driver is conducting rideshare business, Lynch said.

However, despite the intricacies and gray areas of rideshare insurance, that hasn’t stopped agencies from shifting their time-honored business model to service the space. Farmers Insurance, as one example, launched rideshare coverage in January of last year. Now, the coverage is offered in 29 states — with Missouri being the most recent addition in April.

The rideshare insurance space is an untapped market, or at least a few months ago it was, which is why it’s capturing attention from major insurers and startups alike. According to a survey conducted by NerdWallet in February, 77% of rideshare drivers do not have insurance coverage beyond what is offered by their rideshare company. However, 40% of drivers said they plan to purchase the rideshare coverage within the next three months.

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