Update #2: McClelland Insurance will soon be able to insure UberX drivers. Please read up on the latest news about ridesharing insurance HERE.
Uber is a service that allows users to hail a cab through an app on their smart phone. They describe themselves as a service that connects riders and drivers. In the past the drivers have been licensed taxi drivers but that is all changing.
Earlier this week, the company launched UberX in Toronto and Mississauga. Through UberX, regular people can sign up to be drivers and make some extra cash on the side. Drivers must pass a background check and drive a vehicle that is not older than 10 years.
The new service has raised controversy in Toronto. The Toronto office of Municipal Licensing and Standards has criticized the service because drivers don’t hold a city-issued taxi license, haven’t taken training, drive vehicles that haven’t passed safety inspections, lack safety equipment such as cameras and may not be properly insured.
Indeed, drivers operating in this “ride share” grey space don’t have the same financial overhead as properly licensed taxis. Because of this, UberX is able to offer riders fares that are up to 40% cheaper than the standard Toronto/Mississauga taxi fares.
What are the risks for drivers? As mentioned, the Toronto office of Municipal Licensing and Standards feels that UberX drivers aren’t in compliance with existing by-laws. They’re currently reviewing with The City’s legal department and considering their options. Then there’s the insurance.
The Ontario Application for Automobile Insurance is the standard car insurance application, and forms part of the insurance contract for drivers in Ontario. It asks several questions that would apply to UberX drivers:
- Business/commercial use – Drivers are asked how far they drive. If they are using their vehicle to commute to work, they’re asked how far the commute is. It also asked how far the driver will be driving for business/commercial. Typically, any business use will place the driver in a commercial insurance class as opposed to a personal use class.
- Automobile used for car pooling – Most people answer “no” to this question on their applications. However, if they’re driving for a “ride share” program, this could be considered carpooling.
- Automobiles used to carry passengers for compensation or hire – This one is fairly black and white. UberX drivers will be getting paid for carrying passengers and should answer “yes” to this question on their application.
As mentioned earlier, the application forms part of the insurance contract. Any misrepresentation can void the contract. What does that mean in practice? If you have an accident, your company may not be obligated to pay the claim if they learn that the application doesn’t accurately represent what the insured is doing with their car. Even if you become an UberX driver partway through your term, you’d still have a responsibility to inform your insurance company of the change.
Knowing that most of their drivers will not have proper commercial auto insurance, UberX carries supplemental insurance to cover their drivers. This insurance has a $5 million liability limit and $50,000 for physical damage to a driver’s vehicle. While these are likely sufficient for average drivers, those with newer or more expensive vehicles will have to keep the $50,000 limit in mind. We’re looking at you Mr. Deadmau5, and your $300,000 McLaren: http://www.huffingtonpost.ca/2014/09/11/deadmau5-uber-taxi_n_5805094.html
UberX doesn’t just cover their drivers while they’re on a fare, it kicks in as soon as the driver accepts a job through the app. This covers them while they’re on their way to a fare as well. So does this system leave any holes?
Before a driver accepts a fare, they’re on their own insurance. As soon as they complete their trip, they are also back on their own insurance. As we covered earlier, if you’re carpooling or receiving compensation for driving, your personal policy may not cover you. If you had an accident and your company felt you were in that situation as a direct result of working for UberX, they may have grounds to deny the claim. As always, you should review any changes to how you’re using your automobile, including becoming an UberX driver, with your broker to make sure you’re still covered.
UPDATE: I’ve received conflicting information from Uber on their limit for physical damage coverage. Will update once confirmed.
Update #2: McClelland Insurance is unable to insure UberX drivers at this time. A special product is being developed in partnership with Intact and we’ll update this article as soon as something is available. In the meantime, sign up for our newsletter to get the latest updates.