Personal auto insurance has always been more complicated than most policyholders realize. It has always evolved somewhat over time, but with the advent of ride-sharing services leading many individuals to use their personal automobiles for income, the insurance industry has had to react and adapt quickly. These nuances have only become more complicated as the ride-sharing concept expanded to more extensive food delivery options.
And now? Electric scooters available for rent for use on public streets create new questions about whether users are insured and by whom. With the impending transition toward self-driving cars, the questions facing the personal auto insurance industry will only become more complex.
What is an independent agent to do in this rapidly changing area of insurance?
Ride-sharing services like Uber and Lyft have been on the scene for several years, so most agencies selling personal auto coverage should be familiar with how coverage applies when policyholders drive for these services. The ride-sharing services generally provide the drivers using their personal vehicles to transport passengers for a fee with insurance coverage when they are online using the services' applications. The coverage type and amounts that apply vary and are limited.
When a driver is using the app while waiting for a ride request, but has not yet accepted such a request, the service provides no collision coverage and fairly limited liability coverage, typically $50,000/$100,000/$25,000. Once a ride-sharing driver has accepted a request to pick up a specific customer and while the driver is transporting that customer, the services provide greater liability coverage. Usually $1,000,000 as well as UM/UIM and contingent collision and comprehensive coverage, as long as the driver has his or her own personal auto policy. However, when the driver is using their vehicle for their own personal use, the ride-sharing services provide no coverage and the driver needs to rely on his own personal auto policy for coverage.
In other words, ride-sharing drivers must have their own personal auto policy. But it is also important that their personal auto carrier know that they drive for a ride-sharing service. Of course, most personal auto policies define driving for hire as commercial use and therefore exclude it. Personal auto carriers are also likely to cancel an insured's policy if they learn after an accident that the insured had been performing ride-sharing services but did not disclose it during the application process. Getting cancelled can cause problems for the policyholder, including higher premiums when securing replacement coverage.
Some personal auto carriers will refuse to provide a policy to a driver who works for a ride-sharing service and it is important to know that before any accidents occur. Some carriers provide rideshare insurance, typically as an endorsement to a personal auto policy, but sometimes as a replacement hybrid policy. Hybrid policies provide coverage for the driver's personal use as well as the period when the driver is using the app looking for a passenger. If such a hybrid policy is unavailable, a commercial policy may be necessary.
Ride-sharing is not the only recent change in how people use their personal vehicles. Food delivery services like Uber Eats and Postmates are expanding the number of people using their personal vehicles to deliver food well beyond traditional pizza delivery. Even online retailers like Amazon are hiring people to deliver packages in their own vehicles. Similar to ride-sharing, this use of a personal vehicle for commercial purposes is likely excluded under a personal auto policy. While these services often provide some coverage to their drivers while using their app or while making deliveries, coverage may only be on an excess basis and there may be gaps in coverage. There is also the issue of the personal auto insurer cancelling the policy if it learns after an accident that the policyholder was making deliveries.
Most recently, dockless electric scooters have popped up in many cities. The scooters can be parked just about anywhere and riders can unlock them using an app, pay for their ride, and leave them at their destination. They are to be driven on streets, often at speeds up to 15 miles per hour, so riders on these scooters can cause accidents with vehicles. When such accidents occur, does the rider have liability coverage? The scooter companies do not appear to be providing liability coverage to users, though some cities are looking to require that they do. This is likely because most personal auto policies exclude two-wheel vehicles. But do many of the people using these scooters realize that they may have no liability coverage if they cause an accident?
As complicated as some of these questions are, they may pale in comparison to the ones that may be coming. Who is liable if a self-driving car causes an accident? Widespread use of fully autonomous vehicles is years away, but it is coming. Perhaps liability for motor vehicle accidents will shift primarily to self-driving car manufacturers for technical failures, but if the individual user has some autonomy, such as choosing to use the vehicle in unsafe weather conditions, will they still have some liability? How will the personal auto industry handle those issues?
We may not need to provide answers for several years but such questions are already upon us. Personal auto use is changing rapidly and independent insurance agents need to stay up to date and discuss these changes with their customers. Perhaps the most important consideration is to ask customers whether they use their vehicles for anything other than personal use and inform them of potential gaps in coverage. While agents in most states do not have a duty to recommend coverage types or limits, many customers may not be sophisticated enough to know that performing commercial work with their personal vehicles can expose them to coverage gaps. Addressing these questions and reviewing possible gaps could prevent bigger problems down the road.
The good news? Well, at least flying cars are not here. Not yet.
John Nesbitt is an assistant vice president, claims specialist with Swiss Re Corporate Solutions and works out of the office in Kansas City, Missouri. Insurance products underwritten by Westport Insurance Corporation, Kansas City, Missouri, a member of Swiss Re Corporate Solutions.
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