Uber Just Invented an Insurance Category. Here’s What to Make of It.

Uber is now offering coverage for simply firing up its app.

Credit: Uber

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Ride-on-demand company Uber has taken on a criticism over insurance coverage that has plagued the ride share industry at large. Starting today, Uber is offering an intermediate insurance category for when drivers are available for hire but not yet ferrying riders: $50,000 for bodily injury to a single person, $100,000 for bodily injury to everyone involved, and $15,000 for property damage.

Services like UberX can, by relying on non-professional drivers and their cars, be appealingly cheap. Indeed, in some cities UberX costs about half of what a taxi costs. But critics have said that one way of keeping the cost down is off-loading the burden of insurance onto drivers, putting them, their passengers and pedestrians at risk should something bad occur. Of particular concern has been a so-called “insurance gap” that occurs when UberX drivers are actively available for rides but don’t have a passenger in the car, which would trigger a $1 million commercial insurance policy the company carries. The company says that the new coverage is comparable to rates that apply to taxis in many cities.

On a press call, Uber CEO Travis Kalanick argued that the “insurance gap” is incredibly rare, but that the company wants to close it completely. Some takeaways from that call:

Uber wants to ease drivers’ fears. To keep growing, UberX needs drivers, and it can’t afford to have them scared off by unease over coverage. “What we want to do,” Kalanick said, “is to make sure that ambiguity goes away.” First and foremost in their consideration was ensuring that “drivers could feel confident getting in the car [and] working with Uber.”

At the heart of the new plan is a quasi-professional status that will apply to UberX drivers in that space between driving for personal reasons and carrying a fare. “It is contingent upon your personal insurance policy,” reads the company’s policy on the new coverage, “meaning it will only pay if your personal auto insurance completely declines or pays zero because of an accident while you were between trips.” In a follow-up email, a company spokesperson wrote, “When a ride sharing driver is not transporting a passenger and is not en route to transport a passenger, they are just like any other private passenger vehicle on the road.”

Kalanick was asked about whether he worried that some drivers might run into trouble with their insurance companies when they make the necessary claim about an event taking place in that in-between state. Most companies won’t object, he insisted, adding that as the industry matures, insurance companies will adapt their rules so that drivers’ occasional commercial use doesn’t trigger negative consequences.

What counts as “driving for Uber” is still fuzzy. Kalanick was asked whether he worried about drivers gaming the system: Turning the Uber app on just so insurance kicks in, or using multiple rides share apps at once. Uber hasn’t put any checks in place to prevent that, he admitted. But Kalanick said that he’s not too concerned. If people do game, it will be a near-term problem, lasting only until legislators and regulators figure out the specifics and nuances that will govern the new industry. Uber would rather, he said, overfill the gap and be seen as “putting the best foot forward” so that the public debate over ride share isn’t swamped by insurance questions, and instead “rational behavior prevails.”

Uber bets that it is impressing lawmakers. The company has taken heat for its handling of the Sofia Liu case, in which a young San Francisco girl was killed in a crash involving a driver that had been working for Uber. “That particular case doesn’t fall into the gap,” Kalanick said. The drivers’ insurance, rather, has offered to cover up to the insurance limit.

But the company expects that this new move erases the sort of uncomfortable questions raised by Liu’s death from the minds of local lawmakers. A number of cities and states are “starting to set up the rules on the way ride sharing should work,” Kalanick said. “What we make to make sure of is to give [sic] legislators, regulators, etc. the confidence is being protected while the rules are being figured out.” And they aren’t willing to wait for the rest of the industry. Lyft, a competitor, has been spearheading an insurance coalition to tackle exactly these sorts of questions. Kalanick was asked about a recent meeting of the group. He didn’t go, he said, adding, “my understanding was that not much was discussed.”

Kalanick made clear that today’s decision was a public relations move as much as it was a practical matter. Taxicab interests, he said, “have taken their rhetoric to a level that, I think, diverges from reality in a lot of cases.” Uber wants to believe that it has robbed those incumbents of one of their most powerful talking points.

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Nancy Scola is a Washington, DC-based journalist whose work tends to focus on the intersections of technology, politics, and public policy. Shortly after returning from Havana she started as a tech reporter at POLITICO.

Tags: public transportationshared cityappsuberride-hailingsharing economylyft

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