A new study finds that more than half of Uber drivers do not have adequate rideshare insurance, leaving them vulnerable to an economic catastrophe should they have an accident.
The study was conducted by Gigworker.com on behalf of Slice which is an on-demand insurance company that focuses on covering workers in the gig economy.
The study of 500 Uber and Lyft drivers found that 52.2% of drivers do not have adequate insurance protections and are not covered during all periods of their rideshare work.
To understand the ways in which this leaves gig workers so vulnerable to economic catastrophe, it’s important to first understand how insurance works for ride-hail drivers.
- The Three Periods of Rideshare Insurance Coverage
- Where This Leaves Drivers Vulnerable
- At No Time Does Uber’s Insurance Fully Cover Drivers
- Those Who Have the Worst Coverage are at the Most Risk of Having an Accident
- Other Findings from the Survey
- Our Thoughts: Uber/Lyft Need to Do a Much Better Job Informing Drivers about Insurance Issues
Insurers have designated three phases or periods of a rideshare trip that each have different coverages and different requirements for coverage.
- Period 1: This period begins the moment a driver logs into the Uber and/or Lyft driver apps and marks themselves as available for trips. This is the time during which drivers are waiting to be matched with a rider.
- Period 2: This period begins the moment a driver has been matched with a rider and while they are on their way to pick them up.
- Period 3: This period starts once the rider is in the car and ends when the rider exits the car and the driver marks the trip as ended.
Uber provides various levels of coverage during the different periods. (Lyft’s driver insurance program is almost identical).
Uber’s liability limits are very low during this period and they provide no collision and comprehensive insurance.
Uber’s coverage is contingent in most states. That means drivers must first make a claim with their own personal insurer first. Uber’s insurance steps in only after a driver’s primary insurance company denies the claim.
If a driver doesn’t have collision and comprehensive coverage under their own insurance policy, then they will have to bear all the costs, out of pocket, to repair their vehicle if they are at fault in an accident.
Uber (and Lyft’s) insurance will not pay these costs under any circumstance during Period 1. If the Uber driver is not at fault, they will still have to wait for a settlement between their insurer and the at-fault person’s insurer before they will get reimbursed for any repairs. This can take months and the driver would possibly be out of work while he waits.
If they have comprehensive and collision coverage and any additional rideshare coverage their personal insurance company may require, their insurance company would normally pay immediately for any repairs needed to get the driver back on the road, and worry about settling with the other insurance company later. However, due to the low pay drivers earn in this work, many forego collision and comprehensive coverage to save money on their insurance bill.
Since more than half of drivers do not have the additional rideshare coverage which is required by most insurers today, they will not be covered by their insurance company and will most likely face cancellation of their policy.
Uninsured/underinsured motorist: Uber does not offer any uninsured/underinsured coverage during Period 1. Drivers will have to use their own uninsured motorist coverage or personal health insurance policy if they are injured by someone who doesn’t have insurance. But once again, this option will only be available to them if they have obtained the additional required rideshare insurance – which most drivers haven’t.
Where This Leaves Drivers Vulnerable
The main problem for drivers is this: since Uber’s coverage is contingent upon drivers being properly insured for rideshare work under their own auto insurance policies, drivers who don’t have the right coverage won’t be covered at all during Period 1 for any damage they sustain to their vehicles or their bodies. This would leave many drivers vulnerable to possibly catastrophic economic hardships if they are involved in even a minor accident.
If drivers don’t have the additional rideshare insurance from their own insurance providers, they will not be covered at all during Period 1. And many would lose their insurance coverage altogether as their insurers would immediately cancel them the minute they learned they were using their vehicles for commercial activities. (This affects all drivers except in California and Maine).
Traditional auto policies don’t cover drivers who are engaged in commercial activities – and rideshare driving is a commercial activity. So, for drivers who have not obtained the extra coverage specifically designed for ride-hail drivers, their insurance will nearly always be cancelled the moment they report a Period 1 accident to their insurer – which they are required to do by Uber and Lyft.
Just in the last few years though, more and more insurance carriers have begun offering rideshare policies that will cover drivers while they’re doing rideshare work. The problem for low-paid ride-hail drivers though is that more often than not, this coverage adds more than $100 a month to the cost of a driver’s insurance policy. And many drivers cited this as the main reason why they don’t have this coverage.
The second-most cited reasons why drivers said they don’t have the extra necessary rideshare coverage is ignorance. They told us they didn’t know they needed it. Uber and Lyft have not done a good job educating drivers about this most important aspect of their work.
We found that many drivers have the mistaken belief that they are fully covered by Uber and Lyft. They don’t even know that Uber and Lyft’s insurance is liability insurance only – which covers damage done to other people and their property – to damage done to drivers and their property.
It’s easy to see why drivers are in the dark about all this. Uber promises drivers that their insurance will give them “Peace of mind on every trip”. This is the kind of vague and all-encompassing promise that comforts drivers and makes them think they are fully covered.
This screenshot from Uber’s website shows Uber promising to step in where a driver’s personal insurance drops off. Uber’s wording certainly leads drivers to believe that Uber will step in and fully cover them if their own insurance won’t. What Uber is not so upfront about is informing drivers that Uber will not step in during Period 1 at all except to cover liability to others. If drivers don’t have rideshare coverage, they will be left footing the entire bill, out of pocket, for any damage to their own vehicle, property or person.
The coverage Uber is talking about here will only pay for liability incurred to others.
At No Time Does Uber’s Insurance Fully Cover Drivers
While Uber’s marketing materials attempt to give drivers peace of mind, at no time does their insurance fully cover drivers. For collision and comprehensive, drivers have to report any accidents to their own insurance company first and if they haven’t purchased the additional rideshare coverage their insurance will be cancelled. This is why it’s so important for drivers to be aware of the limitations of Uber’s insurance. Because their own ability to drive and earn a living could be quickly taken away if they’re involved in an accident that’s not covered and at the same time causes their personal insurance to be cancelled.
Those Who Have the Worst Coverage are at the Most Risk of Having an Accident
One disturbing additional finding is that the number of miles many Uber drivers drive each week is nearly three times higher than the national average of just 250 miles per week. The more miles a person drives the greater their risk at becoming involved in an accident. And in the case of ride-hail drivers it could be a catastrophic, life-altering accident, even if the accident itself isn’t that serious.
We found that 25% of ride-hail drivers drive more than 700 miles per week.
We also found that more than two thirds, or 67.4%, drive more than 300 miles per week. This is also higher than the national average, which means Uber drivers are at increased risk of an accident.
Other Findings from the Survey
Another finding, and one that is consistent with the findings of many other surveys, is that Uber drivers skew older. Our study found that 25.6% of drivers reported being 61 years of age or older. And a full 60% are 50 years old or older. A minority of just 39.4% are younger than 50. The CDC reports that older drivers have higher crash death rates than middle-aged drivers between the ages of 35-54. Drivers in their late 50s and up are more prone to have accidents, putting most Uber drivers in an even higher state of risk.
Another finding shows that Uber drivers are in an especially precarious position, not only because of their age, lack of adequate insurance coverage and higher risk of having an accident, but what makes all this even worse is that nearly 60% of Uber drivers rely on driving as their sole source of income.
58.8% of the drivers responding to our survey said they have no other job outside of rideshare driving.
And 77.8% of drivers told us that they are dependent on their income from rideshare driving to pay their bills.
Of the half of drivers who do have additional rideshare coverage, 59% told us that they pay $50 per month or more for that coverage. And nearly 37% pay $100 or more.
At the end of the survey we asked an open-ended question and the first few answers here were repeated over and over again.
The first response shows that Uber drivers are under the mistaken belief, no doubt because it is not clearly explained to them by Uber, that Uber offers insurance that covers everything.
The second response shows that the driver doesn’t understand that he’s not covered to and from pickups for any damages to his vehicle or person that is his fault.
The next two comments express what we heard more than any others – drivers consider additional insurance for this job just too high a price to pay – for a job that pays so little.
Our Thoughts: Uber/Lyft Need to Do a Much Better Job Informing Drivers about Insurance Issues
Among other things, the results of this survey reveal that Uber and Lyft both have done an abysmal job of giving drivers the whole picture of what exactly they are covered for under the companies’ insurance policies. And they have made next to no effort to clearly communicate the great risk drivers are at if they are not properly and fully insured with additional rideshare insurance.
Many ride-hail drivers are on the edge economically already. And one simple uncovered accident could push them over the financial edge. If they had to pay out of pocket more than they could afford to get their car back on the road after an accident, it could not only leave them carless but it could also ruin them financially and leave them with no means to continue earning a living through rideshare.