Ridesharing has become one of the fastest growing sectors of the gig economy (aka freelance work as opposed to permanent jobs). According to consulting firm McKinsey, 4 million Americans are currently working in the gig marketplaces and often those marketplaces are built on technology platforms. In order to understand the risks these platforms have, you have to understand the differing views of the players. An underwriter recently told me the founders typically think their platform has no exposure to claims. The underwriters maintain the opposite view that the platform has all the exposure. And the regulators have no clue where the exposure lies. Based upon many recent conversations with founders, underwriters, and other industry players, the insurance needs of ridesharing companies are complex and often misunderstood.
What is ridesharing?
According to Google, ridesharing is an arrangement in which a passenger travels in a private vehicle driven by its owner, for free or for a fee, especially as arranged by means of a website or app. Basically, ridesharing occurs when a technology platform connects a driver with a passenger or group of passengers for a ride. In most cases, the driver is an independent contractor which presents its own set of unique challenges. Most people have heard of Uber and Lyft but there are many other platforms around. Some like Onward focus on ridesharing for seniors. Others like Pickup, Bungii, and GrubHub focus on delivering items, not passengers. And platforms like Kaizen Health are conduits to other ridesharing platforms.
What insurance coverages are most important for ridesharing platforms?
- Auto Liability – This is the most complicated and expensive coverage for ridesharing platforms. Most platforms do not own any autos so the exposure is a hired & non owned auto exposure.
- Cyber Liability – Platforms store and process large amounts of PII and credit card transactions which creates risk. They also stand to lose a large amount of revenue if the platform is down for any extended period of time.
- Employment Practices Liability – There is frequently one on one interaction between the driver and the passenger. And usually this occurs in a private setting. This is a recipe for sexual harassment and discrimination claims.
- Workers’ Compensation – This is slightly less complicated than auto, but not by much. There is a need for coverage for employees, and in some states it’s difficult to distinguish the independent contractors from the employees. The lack of distinction makes this coverage difficult to secure and typically requires occupational accident and contingent liability coverage to accompany a work comp policy.
What does period 1, 2, and 3 mean?
These are the different phases of risk associated with the status of the trip.
- Phase 1 is when the driver has the app on and is searching for a ride
- Phase 2 is when the driver has accepted a ride and is going to pick up the passenger
- Phase 3 is when the passenger is in the car and riding to the destination
As you would expect, Phase 3 carries the most risk and is where we see the most claims activity.
Finding insurance for your ridesharing platform can be expensive and complicated. Make sure you find trusted advisors who know the space.