Ride services are a perfect example of peer-to-peer economics at work. Anyone with a car can join a transportation network and carry passengers for a fee. Drivers love the extra money, passengers love the service, but there's just one hitch -- what happens when there is an accident?
Adrian Anzaldua of San Francisco was making pretty good money as a driver for Lyft. He said, "If you worked hard, you could make $200 per day."
He'd fasten one of Lyft's trademark moustaches onto his personal car and roll out to pick up passengers.
"These services are enjoyed. They have filled a need to get around the city," said Anzaldua.
However, you may notice there is no pink moustache on Adrian's car anymore. He just gave it back. He told us, "I deactivated myself as a driver."
So why would he quit? Well Anzaldua found out he'd been taking a huge risk the whole time. He said, "You could lose the value of your car and whatever payments you have left on it."
He realized if he got into an accident while driving for Lyft, his personal insurance would not cover him. He says other drivers reported their claims were denied and he heard someone had a policy canceled.
"So yeah it could be, it could be bad," said Anzaldua.
"If your car is used as a taxi, or if you're transporting people for a fee, coverage will be excluded," said Nicole Ganley, an insurance industry spokesperson.
Ganley says personal insurance won't cover drivers who take passengers for money.
Services like Lyft, Uber-X and Sidecar are required to carry $1 million worth of liability insurance, but that only covers damage to third-party victims, not to their drivers -- even that can leave a gap. That problem was exposed on New Year's Eve, when an Uber-x driver struck and killed a little girl in San Francisco. Uber denies responsibility, saying the driver was not carrying a passenger at the time of the accident.
And Ganley says if an uninsured motorist crashes into a ride-service car, the driver and passengers could be stuck paying their own damages.
"It's a complicated thing to use a personal car for a commercial purpose and that's why there is some confusion," said Ganley.
"Everyone's telling me I need commercial insurance," said Anzaldua. He did try to buy a commercial policy, but it cost way too much. He said, "The first quote I got for commercial insurance was $12,000."
That was ten times more than he pays for private insurance.
Ride share companies are responding. Lyft, Uber-X and Sidecar now provide uninsured motorist coverage. Lyft offers some collision coverage. Sidecar is planning to do the same. Uber said it pays drivers directly for their personal collision damage.
"So that's a very positive step in the right direction," said Ganley.
However, there are still questions about when these policies kick in.
"What's important is that the benefit to the city is not outweighed by the risk," said Anzaldua.
The insurance problem has caught the attention of the California Public Utilities Commission. So the PUC has now formed a coalition with rideshare services and insurance companies. The goal is to develop a new type of insurance that will protect both the driver and the passengers.
We will be keeping an eye on this issue and will report back.
