Major insurers offering new options for ride-share drivers

Major insurers are jumping into the pool to provide new auto insurance coverage options to California drivers working for ride-sharing companies like Uber and Lyft.

Last week alone, State Farm and USAA announced that they are introducing coverage for policyholders using their personal cars to provide rides through a so-called Transportation Network Company, or TNC for short.

USAA’s statewide coverage is available now. Starting March 21, State Farm will offer its “Transportation Network Company Driver Coverage” endorsement in California. The insurers claim that their products help fill insurance gaps for policyholders driving for TNCs like Lyft and Uber, both headquartered in San Francisco.

State officials said USAA and State Farm are entering a California niche being serviced by more than a half-dozen insurers, including Los Angeles-based Farmers Insurance. Not all coverages are the same. San Francisco-based Metromile, for example, last year launched coverage for Uber drivers based on a flat fee and miles driven.

While noting that TNCs are utilizing mobile technology to prompt changes in the livery/taxi industry, State Farm says ride-share drivers also have been exposed to new risks, or offered coverage with limitations.

“Adapting and innovating to our customers’ changing needs is critical,” said Tom Conley, State Farm senior vice president.

Some industry analysts contend that inadequate insurance has prevented the TNC sector from growing faster, because some prospective drivers were fearful of their degree of liability in a crash. In many cases, personal auto insurance policies did not extend coverage to those using personal autos as ride-share vehicles.

TNCs in California provide $1 million liability coverage when a paying passenger occupies the driver’s vehicle or when the driver has been connected with a passenger and is on the way to pick up that person. However, they provide much more limited liability coverage when drivers are simply “available for hire,” when coverage may not extend to medical payments, comprehensive coverage or collision coverage.

State Farm says its new, optional TNC Driver Coverage enables a policyholder to have a personal auto policy fill in the coverage gaps left by TNC-provided insurance. USAA’s coverage does the same, providing drivers with the full liability coverage limits in their auto policies during the time the drivers are “available for hire.” Additionally, the products provide drivers with all other coverages applicable to their auto policies during all periods of TNC driving.

In simple terms, the California Department of Insurance says the liability coverage offered by both insurers begins when the TNC driver turns on the ride-hailing application and is waiting for a match.

Jesse Mata, USAA product management director, said the new coverage offers an extra layer of security that TNC drivers need.

“Being in an accident before they are matched with a passenger could be devastating to ride-sharing drivers’ finances if they don’t have the appropriate coverage,” Mata said. “I think it may be helpful for drivers who have been a little hesitant about gaps in coverage. We’re certainly pleased to offer this to members in California. The Bay Area and Northern California is the hub of ride sharing. That’s where it originated.”

USAA says adding the new coverage to a driver’s existing policy will add 7 percent to the premium, or about $6 to $8 more per month on average.

State Farm spokesman Sevag Sarkissian said the cost of that insurer’s coverage “will vary … and be specific to the customer depending on the coverages they choose.” In a similar fashion, auto insurance costs have long varied among everyday California motorists, depending on the vehicle they drive, their driving record, where they drive and how many miles they typically drive.

State law requires ride-sharing companies to provide drivers with vehicle insurance.

State Insurance Commissioner Dave Jones, who approved the new State Farm and USAA products, said “closing the insurance gaps in ride-sharing coverage is crucial to making sure passengers, other drivers and pedestrians are protected when ride-sharing vehicles are on the road.”

Uber spokeswoman Eva Behrend called the new programs “great” and said the insurers who have made “products available or have products forthcoming … have recognized the popularity of ride sharing in California.”

Attempts to obtain comment from Lyft officials were unsuccessful.

TNC drivers are encouraged to go online or contact agents of the individual insurers for more details, including specific costs and eligibility.

This story was originally published January 21, 2016 at 2:50 PM with the headline "Major insurers offering new options for ride-share drivers."