Insurer Aviva Canada will soon start offering a modified insurance policy for ride-sharing drivers, hoping to close a coverage gap that could leave drivers and passengers unprotected if they’re involved in an accident.
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The announcement comes in the midst of growing pressure on insurers to clarify whether modern ridesharing services like Lyft and Uber, whose controversial app lets riders summon self-employed drivers through their smartphones, require commercial or personal insurance – and to what degree.
Most drivers on the UberX platform carry only personal insurance, but those policies clearly don’t cover drivers who are transporting passengers for pay. Already some UberX drivers have seen their policies cancelled as a result of insurers’ scrutiny.
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Insurance A Continuing Problem For Ridesharing Services
The issue of ride share insurance has been one of the biggest problems facing cities that are struggling to regulate ridesharing services and create a level playing field between them and taxi or other livery services.
As it stands now, drivers download the app and passengers hope for the best. When an UberX driver pulls up, there’s no way for the consumer to know if he or she is protected.
Uber has said that every ride is backed by $5 million in liability insurance in case the driver’s individual policy isn’t enough. But provincial regulators and insurance companies don’t see things the same way.
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Costs Of Commercial Insurance Can Be Significant
Because Uber operates outside the existing taxi licensing framework and doesn’t own its own fleet of vehicles, its drivers’ operating costs are significantly lower than those of a regular taxi driver – particularly when it comes to insurance.
The gap between the price of commercial coverage and the personal auto insurance most Uber drivers carry represents a significant competitive advantage for ride-sharing drivers. Cab drivers typically pay between $5,000 and $10,000 a year for commercial coverage, depending on driving history, whereas personal insurance costs significantly less.
Aviva Canada’s new offering is really a cross between a commercial and private insurance policy. The coverage will become available, for Ontario drivers at least, next month and is a simple add on to any Aviva-insured auto policy. The company expects to make similar programs available in other provinces later this year.
Eligibility for coverage will still come with some standard underwriting criteria (licensed for a minimum of six years, no other commercial use and a maximum of eight passengers, for example) and will take effect from the moment drivers make themselves available to passengers.
Full-time UberX Drivers Not Eligible
But the coverage won’t be available to all ridesharing drivers. Believing that most drivers signing up for services like Uber work on a part-time basis, Aviva is only providing coverage to drivers that spend 20 hours or less a week lugging passengers.
Those that drive full-time won’t be covered, largely because the odds of them being involved in an accident are so much higher. In insurance terms, cash-starved UberX drivers logged in but not actively working a fare are likely to be far more distracted drivers than those carrying passengers.
The cost for this additional coverage, at the low end at least, would be somewhere around $500-$600, calculated using factors such as the time spent ridesharing, the area driven and the individual’s driving record.
None of this, of course, solves Uber drivers’ main challenge, which is that most municipalities still consider them unlicensed taxi drivers – a view not limited to Canada.
While U.K.-based Uber cars don’t have a meter fixed in them, Transport for London, the local government organisation responsible for most aspects of London’s transport system, recently went to court suggesting the company’s smartphones are really the same thing – another hurdle for this disruptive technology.