Risk Insights: Rideshare Industry
Over the past few years, Uber, a popular ridesharing company, has expanded its operations into a handful of Canadian cities. While drivers and passengers cite ridesharing as a cheaper and more convenient alternative to traditional taxi services, the industry is not without risks.
Before signing up to become a rideshare driver or using the service as a passenger, it is important to understand how ridesharing works and the risks associated with the industry.
How Does Ridesharing Work?
Uber and other rideshare companies connect ride-seekers to drivers through a mobile app. After a match has been made, drivers pick up their passengers and transport them to their desired destinations. Fares vary by city, but typically consist of a base fare and fees per kilometres and minutes driven. Passengers have to enter credit card information into the app before rides can be requested. Their credit cards are then charged for the rides once they reach their destinations, and the rideshare company compensates the drivers. No cash is ever exchanged.
“According to experts, the majority of UberX drivers rely solely on their
personal auto coverage, which, in most cases, won’t protect them from
financial loss in the event of an accident.”
What Happens in the Event of an Accident?
In early 2015, a Toronto UberX driver got into an accident that totalled his vehicle and sent him and his passenger to the hospital. When the driver tried to file a claim, he was told that his insurance had been voided because he was transporting passengers for pay. Meanwhile, Uber’s contingent insurance policy did not apply—forcing him to absorb the cost of his injuries and the cost of damages to his vehicle.
This is just one example of what can happen if you get into an accident as a driver for Uber. Neither Uber’s policy nor your own personal policy can offer sufficient coverage, leaving you without access to accident benefits, collision coverage or third-party liability coverage. These risks are not only a concern for drivers, but for passengers as well.
How to Reduce Your Risk
For passengers, mitigating the risks associated with ridesharing is simple. Before a ride, passengers should ask the rideshare driver to provide proof of commercial insurance, as this is the only type of insurance in Canada that can sufficiently protect you in the event of an accident.
For those considering becoming an UberX driver—or a driver for any other rideshare company—there are a number of precautions you can take to limit your risk, including the following:
Obtain commercial coverage. While this type of insurance is typically more expensive (with an estimated minimum annual premium of $5,000), it’s the only way to guarantee coverage in the event of an accident.
Disclose any pertinent information to your insurer. By letting your insurer know of any changes in how you use your personal vehicle, you will avoid potential fines and gaps in coverage.
Wait to become an UberX driver. Currently, there are limited coverage options for drivers. Until provinces have worked through how to regulate the service from an insurance standpoint, holding off on becoming a driver is the only way to completely mitigate the above risks.
For any questions or more information feel free to contact Moller Insurance at (905) 642-2745 and speak to one of our brokers.