The Dangers and Untold Truths about Ride-sharing Apps

By Raichel Herte

February 2, 2018

Uber, Lyft, and other ride-sharing services can make it easy to get a quick ride, or make some extra income. Every day these platforms are becoming more and more popular.  In fact, in cities where these options are available, taxi ridership has declined on average almost 20%.  Uber Eats, Post-mates, and Grub Hub are also on the rise for the delivery service of food.  While convenience is there, these businesses are still in their early dates of development.  The popularity, risk management and compliance issues they’re facing are all in uncharted territory…especially when it comes to insurance!

How the Apps Work:

Each ride-sharing service has its differences, but they all operate under the same basic concept. Almost anyone can be a driver for these services, but each one has different minimum standards for screening their drivers and vehicles.  Passengers can then see available drivers and make a request through an app on their smart phones.  Most apps will display the driver’s route and estimated time of arrival, in addition to the driver’s name, photo, and vehicle information.  The ride-sharing service then takes a cut of the fare, typically between 20 to 25 percent, for each ride a driver completes.  Often, there rides are also rate surcharged depending on the time of the ride, day of the ride, level of traffic, and distance the driver has to drive.  What this means is that you are being charged for a ride that the end price can be anywhere from 2 to 4 times the amount it should be.  Your driver, on the other hand, is still only making 20 to 25 percent of the initial price you were quoted, not the surcharged price.

These apps are convenient for passengers who need a ride and for drivers looking to supplement their income. Still, they’re not without flaws.  For example, it can be hard to determine what regulations or local laws each service and its drivers need to follow, as well as, what insurance coverage applies to them and who is considered liable in the event of an accident.

When Insurance Kicks In:

Since ride-sharing drivers use their vehicles for both business and personal purposes, the ride-sharing services have to clarify when drivers are covered by different types of insurance.

When a driver is not accepting rides, his or her personal auto insurance is the primary coverage. When the driver turns the app on, but has not yet accepted a ride, ride-sharing services generally offer contingent liability coverage if the driver’s personal auto insurance does not offer protection.  When the person is picked up, the service’s policy is the primary policy until the end of the ride.

State Involvement:

Unlike taxis, which are regulated on a city-by-city basis and have to follow specific guidelines, ride-sharing services haven’t had to adhere to the same strict regulations. However, this is slowly beginning to change.  Some states are enacting laws to set standards and insurance requirements for ride-sharing.  Additionally, upcoming court decisions will help determine who will be held liable for ride-sharing accidents in the future.

Driver Risks:

Some ride-sharing companies provide liability insurance for their drivers in excess of their personal liability. However, this doesn’t mean that drivers have insurance coverage for ALL of their risks. 

** Drivers can be dropped by their insurance company if they engage in a commercial activity on a personal auto policy. As a result, drivers need to be honest about how they intend to use their vehicles when they obtain insurance.  If a driver fails to indicate the intention to drive for commercial use, the insured could not only deny claims, but also drop the driver from the policy entirely.**

Passenger Risks:

When a passenger gets into a car arranged by a ride-sharing app, he or she automatically aggress to a number of terms and conditions. If the driver gets into an accident and the passenger is hurt, there is no guarantee that the driver’s insurance company or the ride-sharing services will pay for damages.  For example, a driver’s personal insurance company may decide that he or she was driving for profit and, for that reason, isn’t required to pay any medical bills.  The passenger would then need to take the driver to court for damages, which can be costly and time consuming.  On the other hand, passengers can approach taxi companies directly regarding liability and other safety issues. 

Safety is also a concern for both drivers and passengers. A drive never knows the type of person about to get into a back seat.  Likewise, a passenger only knows how reliable a driver is from the information that the ride-sharing app shares about the driver.

Tips:

Using a ride-sharing app is generally a safe and reliable method of transportation. However, there are many financial and safety risks to consider.  Keep these tips in mind when using ride-sharing services:

  • Share your trip details with a friend or family member in case a ride goes unexpectedly. Some apps allow you to share your route and driver information.
  • Before you get into the car, check that the driver’s photo, name and license plate match what is listed on the app. Never enter a car with a driver who offers you a ride and claims to be with a ride-sharing service.
  • Never share any personal information that the driver doesn’t need to complete his ride. This includes phone numbers, as ride-sharing apps typically anonymize their passenger’s phone numbers to protect their privacy.
  • Always wear your seat belt. If the car you’re riding in doesn’t have one, or appears to be unsafe, instruct your driver to pull over and cancel the ride.
  • Report unsafe driving on the ride-sharing app immediately.
  • Remember that your ride can be surcharged, without notice. Drivers do not see any extra income from this. They only get 20-25% of the initial quoted fare.

While ride-sharing services evolve to meet the safety needs of drivers and passengers, insurance companies are taking different approaches to claims. Remember, at Buren Insurance “We’re with you from What If to What Now,” so contact our offices at (888) 281-6191, to discuss your auto insurance coverage.  Let’s make sure you are always protected. 

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