Lyft and its rideshare competitors are transforming the lives of the Bay Area's underemployed and out-of-work, but the insurance industry won't cover these drivers' vehicles in the event of an accident, a glitch in the business model of the nascent "shareable economy."
When I started driving for Lyft, I had no idea how I would pay my rent. After my first night shuffling strangers around the city, my worries seemed to be over. I had stumbled onto a stream of money that I could tap into whenever I wanted. I was making enough money that I started to think about replacing my aging Subaru sedan.
When I realized I could write off a good portion of the cost of a new car as a legitimate business expense, I nearly leapt at the opportunity. I started calling insurance companies to find out how much complete coverage would cost on a brand new car, but when I asked about driving with Lyft, I was told repeatedly that personal automobile insurance was insufficient.
The insurance companies that cover limos and taxis said they couldn't help me either since my car wasn't registered as a commercial vehicle. Although Lyft provides a $1 million excess liability policy, there was no way to insure my own car against an accident. The lack of available insurance has left many drivers afraid to continue shuttling passengers, despite decent pay and flexible hours.
CRITICS AND REGULATORS
More than $100 million in venture capital is invested in a handful of new companies working to disrupt the transportation industry. Lyft alone has raised over $80 million, including a $60 million infusion in May by Andreessen Horowitz, a $2.5 billion venture capital firm based in Menlo Park.
On July 30, California Public Utilities Commissioner Michael R. Peevey released his highly anticipated proposal to establish regulations for what the CPUC now classifies as a Transportation Network Company, or TNC. Even before the decision was announced, hundreds of taxis flooded the streets surrounding Civic Center Plaza in a protest and press conference.
"If you don't regulate everybody, don't regulate anybody," said Rosham Bhatta, a 12-year-veteran cab driver, told us. "Why are they above the law? ... They are doing exactly what we do without being regulated, that's the problem we have."
Bhatta said that on top of the $7,000 in annual commercial insurance premiums, they are burdened by numerous other fees that quickly eat away at whatever money they do make. Another driver emptied his pockets in front of me to demonstrate that he'd only made $31 since starting his shift at 9am. It was past noon.
Under the proposed regulations for TNCs, companies must adopt policies similar to those already in place by Lyft and its main competitors.
"Among other requirements established in this decision, we require each TNC (not the individual drivers) to be licensed by the California Public Utilities Commission (Commission)," said the decision, which will also "require criminal background checks for each driver, establish a driver training program, implement a zero-tolerance policy on drugs and alcohol, and require an insurance policy that is more stringent than our current requirement for limousines."
The proposal acknowledges the lack of available coverage for TNCs, and as a result "the insurance coverage must be available to cover claims regardless of whether a relevant TNC driver maintains insurance adequate to cover any portion of the claim."
"Lyft, Sidecar, and Uber have insurance coverage that currently meets our requirement," said PUC Spokesman Chris Chow via email when I inquired about whether the existing policies these companies are carrying would step in should drivers have an accident where they are at fault and their insurance company refuses to cover the claim.