The popularity of commercial ridesharing, which connects drivers and riders for a fare via smartphone app, has skyrocketed in recent years. Transportation network companies (TNCs) like Uber and Lyft have not only disrupted the taxi's traditional drive-for-hire business model, but also have presented challenges for policymakers and insurers with a vested interest in protecting the public.
This year's big insurance story has roots in regulations passed by the California Public Utility Commission in fall 2013 and really emerged last New Years’ Eve when an Uber driver struck and killed a 6-year-old in San Francisco. Since then, as TNCs expanded across the country, controversy, cease-and-desist orders, fines for operating without a license, and legislative and regulatory battles have followed.
TNCs marshalled celebrity investors, loyal customers and people who drive for the services to convince policymakers their operations differed from taxis. Meanwhile, taxi companies relied on their army of drivers and experience navigating regulatory avenues to preserve their business model. Sometimes lost in the heat of battle over whether TNCs should be subject to the same regulations as taxis are important insurance implications that need to be addressed. However, the insurance industry diligently worked to keep consumer protection front and center.
Faced with the competing interests, cities and states have struggled to balance regulations and ensure consumer protection. The National Association of Insurance Commissioners (NAIC) and more than 20 state insurance departments and public service commissions have issued consumer alerts or advisories highlighting the potential insurance gaps in coverage for TNC activity and encouraging TNC drivers to talk with their insurers to understand their exposures.
State legislatures including Arizona, California, Colorado, Connecticut, District of Columbia, Florida, Georgia, Illinois, Maryland, North Carolina, New Jersey, Oklahoma, Pennsylvania, Rhode Island, Virginia and Washington have considered legislation.
Most recently, California lawmakers sent Gov. Jerry Brown legislation (AB 2293) that provides public protection by establishing reasonable insurance limits and creating a firewall that protects personal auto insurance from subsidizing commercial activities. AB 2293 gives TNCs flexibility to meet insurance requirements, which led to Uber and Lyft to support the legislation.
On the other hand, Illinois Gov. Pat Quinn vetoed legislation that would have provided a uniform statewide approach to insurance issues and consumer protections. Groups such as the Illinois Insurance Association and the Property Casualty Insurers Association of America expressed disappointment by the veto because the legislation offered clear insurance rules that would not leave policyholders or accident victims in the lurch because of coverage disputes. The bills also would have helped to avoid confusing and costly patchwork of local regulations.
Earlier this year, Arizona Gov. Jan Brewer vetoed HB 2262, which would have forced personal auto insurers to cover the riskier driving behavior of TNC drivers. Colorado Gov. John Hickenlooper signed legislation that sets up the framework for TNCs to provide primary insurance coverage for all commercial activity, including when drivers log onto their apps and are available for hire through the time period when they have a passenger in the vehicle until the driver logs off the app and is no longer available to accept rides.
The landscape of TNCs and insurance has evolved as insurers accept more responsibility in providing coverage. But there are still gaps and the potential for disputes. PCI continues to work at the state and local level to support the development of solid guidelines so there is clarity regarding what insurance coverage is being provided and when it is in effect.