Seizing its slice of the so-called shared economy — and fi lling real coverage gaps — insurance companies increasingly are off ering policy options for transportation network companies, or TNCs, better known to drivers and passengers by brand names, such as Uber, Lyft, GrabCar or Wingz.
TNCs connect paying customers who need a ride somewhere with drivers who use their own non-commercial vehicles to get them there. It’s being done nationwide, and of course here in Lexington, cheaply and efficiently via websites and smartphone apps.
These new transportation services have exposed drivers to new risks. With the growing popularity of these services, automobile insurance companies have had to scramble to figure out how best to insure drivers who could have gaps in their personal auto coverage. Insurance giant State Farm is the latest company to jump in to offer added protection to its customers.
“There is a whole different set of liabilities issues that come into play when someone is paying you to pick them up and drive them,” said Stewart Perry, a longtime Lexington State Farm agent.
Companies like Uber and Lyft offer insurance coverage for their drivers, but it only kicks in the moment the drivers turn on their mobile apps or head out to pick up a fare or during the time the customer is actually in the vehicle and heading for their destination. Insurance coverage while cruising around or sitting in an idle vehicle waiting for a customer to ask for a ride is not ordinarily provided by the TNCs.
A basic auto policy has certain language and certain coverage provisions — called “endorsements” — that can be removed or added to as needed. State Farm’s new optional TNC Driver Coverage Endorsement for Kentucky allows a driver’s personal auto insurance policy to fi ll coverage gaps left by TNC-provided insurance.
“Adapting and innovating to our customers’ changing needs is critical,” said State Farm national spokesman Kip Diggs. “This new product … provides them coverage and peace of mind when they use their personal cars to provide TNC services.”
Perry said the part-time, for-hire jobs many people engage in leaves them without proper insurance coverage. That applies to not only Uber and Lyft drivers, but also to anyone who uses their own vehicle to make money. For instance, he said, someone hauling a truckload of firewood for pay or who regularly drives the elderly to a senior citizens center and is reimbursed might not be covered during those trips by personal auto insurance.
“They need added coverage,” said Perry. “If they have an accident while doing these activities, they won’t collect a dime unless they have the additional coverage.”
Like all coverage, policy’s extending protection to TNCs carry a price tag.
“It depends on the individual driver and their driving record,” Perry said. “But normally, you would pay an additional 15 to 20 percent.”
If you drive your car normally, there is no extra charge. But when a TNC driver turns on their app and become available for hire, it changes. Your personal auto policy excludes liability and physical damage coverage for you while that app is turned on. Once you have accepted a fare and you are actually transporting someone, that is when the coverage Uber or Lyft or some other TNC provides you through your contract is in effect.
This extra coverage is for part-time, for-hire drivers only. Perry cautions that if you attempt to do it full-time, then you will need a specialized commercial automobile policy.
Other insurance companies also have begun offering additional coverage to TNC drivers.
“State Farm decided that because it is getting so many requests for coverage that the company would design a specific endorsement to cover people who are going to do this on a part-time basis,” said Perry.
Lawmakers nationwide are also taking notice of the insurance issues facing TNCs and their drivers. The Insurance Information Institute reports that some states are working to enact legislation that covers what insurance coverage is necessary for drivers to operate legally from “app-on to app-off.”