Where Social Media, Apps and Insurance Collide (literally)

My non-insurance friends don’t believe me when I tell them insurance is part of everything that goes on in this world, but it is. Take for instance, the latest series of news stories around UberX and other services such as Lyft. The question is, do UberX drivers have insurance coverage when they are “on the job”, i.e. when their apps are turned on trying to score a ride and driving people around. The raft of articles stems from a serious accident that occurred with an UberX driver (not a fare) in San Francisco last New Year’s Eve.

The insurance issue is not with Uber Black Car services but with UberX. Uber Black Car drivers are licensed livery drivers with livery insurance. UberX drivers are NOT licensed livery drivers, they are driving their own personal cars and have a traditional personal lines policy on the vehicle, not a livery policy.

Livery is, in almost all personal lines policies, excluded as covered loss. In the aforementioned San Francisco accident, the insurance company elected to pay; I’m not surprised by that. In general, courts would tend to lean toward whatever the public good is. In this case, to not have the claim paid would have subjected the family of the victims to an even greater loss, so if the case went to court, the insurer would have probably been forced to pay. Don’t be surprised if other insurers reject the claim outright as outside of the policy conditions. If the insurer does pay, it would be reasonable for them to subrogate either against Uber or, more likely, look to recover claims paid from the driver themselves (who most likely would not be able to cover the costs of the loss). Also expect to see a lot of non-renewal or cancellation notices for violating the terms of the policy agreement.

I had to check the wording of my own policy, which reads: “Exclusions…For that person’s liability arising out of ownership or operation of a vehicle while being used as a public or livery conveyance. This exclusion does not apply to a share the expense car pool.” While UberX and related services might try to defend the coverage under the case of their “ride sharing” service being a “share the expense car pool”, that’s not what it is. It’s a livery service, taking unknown people from point A to point B for a fee, a business transaction. Expect to see a lot of policy wording being tightened up over the next year. Since personal line contracts are a contract of adhesion, a judge might stretch the “share the expense car pool” to cover “ride sharing” but that just means insurers have to be very explicit going forward.

As a response, Uber has put in place coverage that will respond if the drivers’ personal lines policy won’t respond. It didn’t say what would happen if the insurer tried to recover the paid claims from the driver or tried to subrogate against Uber. Also, local regulators are trying to address the insurance requirements of ride sharing services such as UberX. What hasn’t been covered much by the press is the licensing of UberX drivers, who do not have livery licenses (in Hoboken, NJ, UberX drivers are getting ticketed for picking up passengers illegally, since they’re not licensed to do so).

What should insurers do? This is a perfect example of where insurers need flexible underwriting and claims solutions that are capable of capturing best-practice rules and processes for handling new underwriting, product, claims and regulatory requirements associated with this new trend.

From an underwriting perspective, insurers need to capture information that will enable the insurer to identify participants in ride sharing services and accurately underwrite this new risk. This includes being able to bring new products to market to support this new class of risk or, at a minimum, respond to new regulatory requirements being developed.

For claims, insurers need to be able to adjust not only settlement processes but subrogation and recovery practices. Plus as new laws are enacted, insurers need to be able to comply to emerging regulation. Chances are this will also create a new class of policy with its own distinct set of claims processing.

Insurers need core solutions that enable them to quickly enable change within their environment. This includes being able to initiate new processes and workflow that would provide detailed, context sensitive information to the users of the system. This will not only optimize underwriting results and control claims costs but will also reduce training costs and keep the quality and consistency of work processed high without extensive training.

Can newer technology, such as telematics (is an UberX driver also more likely to opt into a PAYD policy?), point to changes in auto usage that could signal an insured becoming involved as a UberX driver? Analytics and rules will be key for insurers to up their game in order to address the identification of trends for underwriting, claims, policy development and administration.

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