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TRANSCRIPT
RIDESHARE COMPANIES: INSURANCE & REGULATORY ISSUES
FOR STATES
Griffith Foundation & Council of State Governments
Webcast | 23 June 2015
KIM B. STAKING
CALIFORNIA STATE UNIVERSITY, SACRAMENTO
RIDESHARING INTRODUCTION AND BACKGROUND
“You never change things by fighting the existing reality. To change something, build a new model that makes the existing
model obsolete.” ― R. Buckminster Fuller
HISTORY OF THE SHARING ECONOMY THERE IS NOTHING NEW UNDER THE SUN!
•Some assets are too expensive for most individuals
• It is convenient to share some assets
UNLOCKING VALUE IN UNDERUTILIZED ASSETS
In the sharing economy, individuals are able to unlock the value of existing assets.
These can either be stores of value or wasting assets. The latter are more common.
This creates value for both sides of the transaction.
UNLOCKING VALUE IN WASTING ASSET AUTOMOBILE DEPRECIATION OVER 5 YEARS
29,873 27,314
24,186 20,579
17,406 14,593
12,069
- 2,559
5,687 9,294
12,467 15,280
17,804
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
New Minute 1 Year 1 Year 2 Year 3 Year 4 Year 5
Value Accumplated Depreciation
Source: http://www.edmunds.com/car-buying/how-fast-does-my-new-car-lose-value-infographic.html (Retrieved 6/16/2015). Assumes $15,000 miles per year. Does not include the cost of fuel, maintenance, insurance, etc.
8.6% 10.5% 11.47% 10.6% 9.4% 8.5%
19.1%
Drivers Unlocks value of
underutilized assets to
provide income
Passengers Don’t need to purchase an underutilized
assets
Technological Platform (TNC)
Connects drivers & passengers via smartphone
Manages payments
Reduces asymmetric information
Extracts economic rents
MONETIZING AN UNDERUTILIZED ASSET VIA A TECHNOLOGICAL PLATFORM
WIN … WIN … WIN!
REGULATORY ISSUES – PUC Transportation Network Companies (TNC):
Are TNCs and Ridesharing subject to regulation?
Should TNC regulation be similar to taxi/livery services?
Background checks of drivers
JUDICIAL ISSUES – COURTS
Ongoing Legal Questions Regarding
Transport Network Companies (TNC)
Is Ridesharing Legal?
Who is responsible for paying claims?
Independent contractors or employees?
Confusion when legislation and regulation not clear
REGULATORY ISSUES – INSURANCE TRANSPORT NETWORK COMPANIES (TNC) / DRIVER
Who is responsible in case of accident?
Is driver’s personal auto insurance sufficient?
Is commercial insurance needed?
Is insurance coverage provided by TNC sufficient?
INSURANCE ISSUES
NEED FOR INNOVATION | COMING UP WITH SHARED SOLUTIONS
MARKET DRIVEN VS. REGULATOR DRIVEN APPROACHES
“Taking a new step, uttering a new word, is what people fear most.” ― Fyodor Dostoyevsky
“NEXT TIME, LISTEN TO YOUR ACTUARIES!”
ECONOMIC INCENTIVES VIS-À-VIS INSURANCE
ESPECIALLY UNDER CONTINGENT COVERAGE (BUT IN ALL TIME PERIODS FOR MINOR DAMAGES)
What incentives are created by existing rideshare insurance structure?
INSURANCE GAPS
Passengers:
• Generally equal or better coverage than taxis
Drivers:
• Low level of coverage during the contingent period
• Currently no worker’s compensation coverage
• Drivers are on their own to get life and medical insurance
INSURANCE GAPS
Ridesharing Companies Transportation Network Companies (TNCs)
• Court cases challenging independent employee status
• Legislation regarding legality in states and cities
• Risk of piercing the corporate vale in event of major accident
NEED FOR INNOVATION IN INSURANCE MARKETS
Big Data
Problem
TNCs are working with selected
insurers to design policies for
Rideshare drivers
Why the Delays?
CHANGING INSURANCE MARKETPLACE INSURERS ARE BEGINNING TO PROVIDE COVERAGE AS
PILOT PROGRAMS
Metromile (California): Purchase insurance per mile driven. Specifically includes ridesharing. Cost 5-6 cents per mile. Does not charge for miles when the app is on. Uber only.
Erie Insurance (Illinois, Indiana): Amendment to allow ride sharing coverage in personal policy as excess insurance for TNC activity for any insured with a business classification on personal auto. Excludes livery restriction.
Allstate (Colorado, Illinois, Texas, Colorado): Ride for Hire endorsement. Expect $15 to $20 a year to a driver's bill.
CHANGING INSURANCE MARKETPLACE INSURERS ARE BEGINNING TO PROVIDE COVERAGE AS
PILOT PROGRAMS Farmers (Colorado, California). Extends cover through contingent period. Expect 8% increase in customer's premium
MetLife (Colorado): Extends coverage through contingent period. Lyft only.
Geico (Virginia). Policy offers coverage during all phases of driving. Expects pricing to fall somewhere between personal and commercial policy.
Liberty Mutual is only providing coverage for non-rideshare (personal) related driving. No coverage when app is on. Must be part of multi-car policy.
RIDESHARE COMPANIES: INSURANCE & REGULATORY ISSUES
FOR STATES
Griffith Foundation & Council of State Governments
Webcast | 23 June 2015
QUESTIONS?
Questions?
Please submit them in the question box of the GoToWebinar taskbar.
REFERENCES Benecke, Chris, Denise Brown, Joe Dillon, Brian Gerritsen, Leah Heller & Kim B. Staking. (2015). Risk Management Implications of the Sharing Economy. CPCU Working Paper (Golden Gate and Sacramento CPCU Societies). Retrieved from http://www.goldengatecpcu.org/files/public/CPCU_Sharing_Economy.pdf on 4/23/2015
California Legislative Information (n.d.), AB-2293 Transportation network companies: Insurance coverage (amended in Senate August 26, 2014). Retrieved from http://leginfo.legislature.ca.gov/faces/billTextClient bill_id=201320140AB2293.xhtml on August 27, 2014.
California Public Utilities Commission (2013, September 19). Decision adopting rules and regulations to protect public safety while allowing new entrants to the transportation industry. Decision 13-09-045 (issued Sept. 23, 2013). Retrieved from http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M077/K192/77192335.pdf on September 13, 2014.
California Public Utilities Commission (2014, June 10). PROPOSED Order Instituting Rulemaking on Regulations Relating to Passenger Carriers, Ridesharing, and New Online-Enabled Transportation Services. Agenda Item #13072 (Rev. 1) 13-09-045. Retrieved from http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M098/K126/98126852.pdf on August 14, 2014.
Casualty Actuary Society. (2014, Dec 11). Actuaries Debate Insurance Issues in Ridesharing. Press Room. Retrieved form http://www.casact.org/press/index.cfm?fa=viewArticle&articleID=2740 on May 20, 2015
Harrison, Sheena. (2015, February 15). Uber, Lyft could be forced to provide drivers with workers comp benefits. Business Insurance. Retrieved from http://www.businessinsurance.com/article/20150215/NEWS08/302159993/uber-lyft-could-be-forced-to-provide-drivers-with-workers-comp?tags=%7C69%7C92%7C304 on May 20, 2015.
Isaac, Mike & Natasha Singer. (2015, June 17). California Says Uber Driver Is Employee, Not a Contractor, New York Times: Technology. Retrieved from http://www.nytimes.com/2015/06/18/business/uber-contests-california-labor-ruling-that-says-drivers-should-be-employees.html on June 18, 2015.
REFERENCES Independent Insurance Agents and Brokers of America, Inc. (2015.) ISO Files New PAP “Car Sharing” Endorsements. Virtual University. Retrieved from http://www.independentagent.com/Education/VU/Insurance/Personal-Lines/Auto/Rental-Cars/Wilson2015ISOTNCPAPFiling.aspx on May 14, 2015
Jones, David (2014, April 14). Letter to Michael R. Peevey, President of California Public Utilities Commission related to insurance issues and Transportation Network Companies. Retrieved from http://www.scribd.com/doc/217289190/Insurance-Commissioner-Rideshare-recommendations-to-California-Public-Utilities-Commission-on-Lyft-Sidecar-Uber#scribd on February 10, 2015
Knowledge@Wharton (2014, July 16). Kicking the Tires on Uber’s $17 Billion Valuation: Is It Worth That Much? Retrieved from http://knowledge.wharton.upenn.edu/article/kicking-tires-ubers-17-billion-valuation-worth-much/ on July 15, 2014.
Knowledge@Wharton (2014, Nov. 5). Sharing economy 2.0: Can Innovation and Regulation Work Together? Retrieved from http://knowledge.wharton.upenn.edu/article/the-next-phase-for-the-sharing-economy/ on November 6, 2014.
National Association of Insurance Commissions. (2015). Transportation Network Company Insurance Principles for Legislators and Regulators. Retrieved from http://www.goldengatecpcu.org/files/public/NAIC_2015.pdf on May 14, 2015
Singer, Natasha (2014, August 16). In the sharing economy, Workers Find Both Freedom and Uncertainty. The New York Times. Retrieved from www.nytimes.com/2014/08/17/technology/in-the-sharing-economy-workers-find-both-freedom-and-uncertainty.html?_r=0 on November 25, 2014.
Vallet, Mark. (2015, June 18). Insurers roll out ridesharing policies. Insuracne.com. Retrieved from http://www.insurance.com/auto-insurance/coverage/insurance-rideshare-uber-lyft.html
Wood, Robert W. (2014, Jan 8). Big Liabilities For Uber, Sidecar And Lyft? Forbes. Retrieved from http://www.forbes.com/sites/robertwood/2014/01/08/big-liabilities-for-uber-sidecar-and-lyft/ on May 14, 2015.
DUELING COST ESTIMATES Uber Frank Chang, Lead Actuary
• Study by Milliman to measure the impact of ridesharing drivers on Period 1 in Colorado;
• Net result on the personal auto insurance would increase all policies was $0.70 / policy.
• However, each passenger in a ridesharing vehicle is one less driver on the road. This reduces the miles covered by personal insurance.
• Giving bar-hoppers a safe way home, ridesharing actually makes roads safer.
Property Casualty Insurers Laura Maxwell, Pinnacle Actuarial Resources
• Drivers tend to look for rides when demand is high. Later at night and in bad weather.
• Rideshare drivers also tend to be more distracted, Maxwell said, while checking their apps and finding their fares
• Par-time Rideshare drivers (1,000 miles/year) Expected cost $100 to $200
• Full-time drivers in Colorado would pay $1,000 to about $1,500
• Full-time drivers in San Francisco would pay an additional $3,000.
Source: Actuaries Debate Insurance Issues in Ridesharing http://www.casact.org/press/index.cfm?fa=viewArticle&articleID=2740#sthash.DxyWHzIi.dpuf