Ride-sharing carries risks for HNW individuals and families
Ride-sharing provided by Transportation Networking Companies (TNC's) carries risks related to High Net Worth (HNW) individuals and their families. Companies like UberX, Lyft and Sidecar are achieving great popularity by promoting creative business models for individuals to use their private passenger vehicles to transport others for a fee. These opportunities are especially popular with younger, well-educated individuals living in urban areas according to a study undertaken by the University of California, Berkley. As these companies grow and service increases, the risks associated with them are becoming clearer. Some of these risks are of particular concern to HNW individuals and their family members who use or provide these services.The Private Risk Management Association has identified several risk management and insurance considerations that we think HNW individuals and their families should be aware of. The considerations listed below are not intended to be comprehensive but rather illustrative of the types of risks that could be present while using or providing these ride-sharing services.
- A typical TNC provides $1,000,000 of liability coverage for their drivers. This amount of coverage may not be sufficient to cover the HNW individuals' needs. The personal automobile and umbrella insurance of the HNW passenger should be reviewed to ensure it will respond to a claim that is underinsured. [Passenger issue]
- While TNCs typically offer $1 million of (commercial) auto liability coverage for participating vehicles that are being used to pick-up or transport passengers, coverage is much more restrictive when the vehicle is operating and awaiting notification for a pick-up, a.k.a., the gap period. For example, for Lyft drivers whose app is 'on', awaiting notification of an assignment, coverage drops to contingent liability of $50,000 per person and $100,000 per accident and $25,000 for property damage. It's important to understand how a client's private insurer would respond during this 'logged and available' period. [Driver issue]
- Lack of regulation and mandatory insurance requirements may lead to inadequate insurance coverage, unscrupulous drivers, fraud and crime (kidnap for ransom). [Passenger and Parental issue]
- Most TNC drivers are independent contractors who may not have workers compensation insurance in place to protect them from injuries they sustain on the job. This may cause drivers to have an increased incentive to sue a HNW passenger for injuries resulting from an accident. [Passenger, Parental and Driver issue]
- Sometimes there are differences in insurance provisions/policies within a given TNC. For example, Uber publishes different insurance policies for UberX, UberBlack, and UberTaxi. [Drive and Passenger issue]
- Some TNCs are 'looser'in their requirements, creating even greater risk for passengers. For example, as of last summer Sidecar's commercial policy didn't include uninsured/underinsured motorist coverage for their California drivers. [Driver and Passenger issue]
Informing HNW individuals, their families and their advisors of these risks can help us prevent a disaster and potentially help improve this popular business model for future users. The Private Risk Management Association is working to develop further research on this topic and others like it that will help us better understand how emerging hazards will impact our clients and colleagues.