Proper Insurance the Key to Ridesharing Success

It is has been my experience that people tend to view insurance policies the way teenagers view their parents: A real nuisance…until you need them that is. For users of ridesharing services like Uber, insurance may not even be an afterthought. But with the recent warning from Alberta’s Superintendent of Insurance to Uber drivers, insurance has jumped from bottom of the list to top of mind.

“If you’re using Uber, you are at risk. That doesn’t mean in every circumstance a claim will not be paid, but that risk is high,” said Superintendent Mark Prefontaine.

The Rise of Ridesharing

Carpooling is not a new phenomenon. In the early 1900’s, a recession prompted many drivers to offer rides for the same rate as “street cars”. The practice virtually disappeared when new liability regulations were introduced, but today, technology has put a new spin on an old idea.

Over the last five years, a number of businesses have developed mobile apps to match drivers in their personal vehicles with passengers looking for a ride. Companies like Uber, Lyft and Haxi have gained a following for the advantages they offer over traditional taxis. While riders focus on the convenience and cost savings, drivers embrace the chance for extra income.

Ridesharing, however, as it’s commonly called, has drawn fire for a lack of proper regulation, licensing, training and, perhaps most notably, insurance.

Take Cover(age)

According to Prefontaine, “drivers using Uber ridesharing services may believe that Uber’s supplemental insurance provides the necessary coverage. This is currently not the case in Alberta.”

If you’re tempted to react like a teenager and ask why you should care, the reasons are compelling.

For drivers, it means acquiring costly commercial insurance or leaving themselves open to even costlier liability in the event of an accident.

For passengers, it renders them vulnerable if they’re hurt in a collision, when they may miss out on vital accident benefits or any compensation for their injuries.

Sean, an Edmonton Uber driver, calls it a “catch-22 situation”, a fitting phrase when your main fear is getting caught.

“Basically, it means I either buy insurance that I can’t afford to carry or risk a lawsuit that I can’t afford to pay.”

And with commercial insurance running at $6,000 a year or more, Sean says it’s hard to justify for people seeking a part-time income, which, as he points out, “was the target audience of ridesharing services to begin with”.

“Basically, it means I either buy insurance that I can’t afford to carry or risk a lawsuit that I can’t afford to pay.”

What to Resolve Before you Ride

So what does this mean for prospective users of ridesharing, either as drivers or passengers? Here are a few things to know:

1. If you’re thinking of signing on as a driver, contact your insurance company first to ensure you have the proper coverage for protecting yourself and your passengers.
2. In all likelihood, you will need to purchase commercial insurance if you don’t already have it. So talk to others working for that ridesharing service and find out what you can expect to make per hour on average. Then crunch the numbers and decide whether you’ll earn enough to justify the higher insurance costs.
3. Before getting in the car as a passenger, always ask the driver for proof of commercial insurance coverage. If they can’t give it to you, don’t give them your business.

For many, these are challenging economic times, and the thought of making some extra cash without breaking a sweat is appealing. But before you decide to call Uber—or one of their competitors—, take a cue from your teenager: Question everything.

If you still have more questions about the risks of being an Uber driver or passenger, give our insurance team a call and get answers.