Why rideshare drivers take unnecessary coverage risks

Drivers working for rideshare companies, such as Lyft and Uber, have good access to information about additional insurance coverages they should be purchasing. But they don’t always buy those policies.

“The Top 5 transportation network companies [or TNCs, as insurers refer to rideshare companies] all have fairly robust websites when it comes to helping their drivers know what to purchase,” says Edward Walker, shared economy practice leader at Hub.

“That being said, those are strong recommendations, they’re not mandatory.”

But, given high inflation and looming recession fears, more gig workers may find themselves having to choose between paying for better insurance coverage and rolling the dice on risk. And, if recession fears materialize and people experience layoffs, the ranks of gig workers may soon swell.

Related: Brokers – how to advise rideshare drivers on their deductibles

If that happens, Walker notes, “you’re going to get a lot of first-time TNC drivers [who may not] take the time to review with [their] carrier the risk being put on [themselves and their existing policies] when they join or work for one of these operators.”

Driving for rideshare and delivery platforms creates personal auto coverage risks for brokers’ clients, Walker notes, especially since current economic conditions mean a rising percentage of overall drivers on the road are not insured.

“A lot of drivers today are cutting corners [and] insurance, in the grand scheme of things, tends to be one of the things – when people are pressed on their budgets – [that is among the] first to go,” he tells CU.

On top of that, most TNCs have now been in business for a decade, so the insurance policies they provide to their drivers have been tweaked to reflect years of claims and risk data. That means the rideshare companies are offering what Walker calls, “a very cost-conscious and efficiency-focused layer of insurance.”

As such, optional coverage for things like underinsured and uninsured motorists – which represent a high percentage of historical claims for rideshare firms – is likely not provided. And while the TNC will recommend its drivers carry additional coverage, new drivers signing up on the platform will still be accepted if that additional coverage isn’t purchased.

“You can find yourself in a situation where you were struck by someone else without insurance. The transportation network company itself has no coverage for that loss. So, you will not be covered [by] them,” says Walker.

“The most important thing to remember is most [TNCs] have very broad, sweeping exclusions. This isn’t five years ago. The underwriting community now has had time to react.”

Related: Do gig-driver clients have the right auto coverage?

Which means rideshare drivers need to be transparent with their personal insurers to make sure they close coverage gaps.

“I always encourage higher levels of transparency despite the increase in cost [the client is] going to see. It’s just not worth the risk,” says Walker.

“You could make an argument that ‘Hey, I do it on weekends, just delivery.’ Or perhaps [the insured] doesn’t care much for the vehicle [being used]. There are nuances to it. But realistically speaking, you could find yourself in a pretty significant situation financially.”

And considerations extend beyond vehicle damage to include medical bills. “I’ve seen some very disastrous outcomes for this type of situation,” he adds.

Plus, on the vehicle side, drivers who don’t make an effort to protect their own assets should not expect an employer to do it for them. “It doesn’t make sense from a risk-management perspective,” Walker explains. “Why would an entity you work for have a stake in protecting your car if you’re not going to protect it?”

Feature image courtesy of iStock/humonia