It was just three years ago when more than a dozen state insurance chiefs issued strongly worded consumer alerts declaring an insurance coverage gap for passengers in rideshare vehicles. Insurers, for their part, were slow to provide solutions for the rideshare community. In some cases, they were even actively hostile toward ridesharing.
At the time, only the surplus lines market was a willing provider of insurance coverage for rideshare vehicles, likely at a premium well above the actual cost of risk. Given this state of affairs, if consumers could not trust that rideshare vehicles were safe, the very premise upon which the sharing economy was built was in danger.
Fast forward to today, when automobile insurance requirements for ridesharing vehicles have been firmly established by statehouses around the country, closing any notion of an insurance gap. Those insurance rules were drafted to encourage innovation, allowing personal auto insurers to provide the required coverage. Since then, dozens of personal auto carriers have entered the market to create admitted rideshare insurance policies. These policies provide a more affordable choice for consumers than the originally available—and expensive—commercial auto policies.
While the question of automobile liability insurance has been answered, ensuring that these technology platforms would be safe for passengers, another question has come into focus: What about the independent contractor drivers of the rideshare vehicles?
Up until this point, workers compensation was seemingly their only option, but independent contractors are not covered under the technology platform’s workers comp policy. If an independent contractor were to purchase a workers comp policy, it would be expensive, not easily attainable and wouldn’t allow for usage-based pricing.
Enter occupational accident insurance. Given its relatively low profile outside of the transportation world, occupational accident insurance is virtually unknown. At a high level, occupational accident insurance is a substantive first-party coverage that is triggered in the event of an on-the-job accident, providing medical expense payments, income replacement, indemnity payments in the event of certain catastrophic injuries, and a death and survivor benefit paid to one’s beneficiary, all up to certain limits established in the policy.
OneBeacon Accident & Health announced a pilot of usage-based driver injury protection insurance for Uber rideshare drivers in eight states in late May.
By August, the protection was available in 30 states.
Available through Aon Affinity and underwritten by OneBeacon’s Atlantic Specialty Insurance Co., the coverage provides up to $1 million in medical benefits for covered injuries, as well as disability (earnings replacement) and survivor benefits.
Customers pay the coverage based on usage, instead of traditional monthly premiums, reflecting a per-mile rate of $0.0375.
Drivers who elect to enroll are protected for injuries while online—en route and on trip in connection with the Uber app.
Moreover, occupational accident insurance can utilize usage-based pricing methodologies to cover the part-time, independent worker only when they are driving, delivering groceries or even babysitting. This means that independent workers pay only for what they use, a key concern of theirs.
Lastly, occupational accident policies are often marketed via groups, meaning that all users of a particular technology platform have the opportunity to purchase and obtain coverage for themselves.
Providing coverage only for the time when the independent worker is providing services would also seem to fit neatly with the outcome of the earlier debate over ridesharing automobile insurance. In 2014, some argued for rigid automobile insurance requirements, which was evident, for example, in early legislative proposals such as AB 2224 in California, which required rideshare companies to buy a $1 million commercial auto policy covering all rideshare vehicles, at all times.
While it undoubtedly solved the problem, the legislation was overkill and inefficient, requiring a level of coverage more fitting for a full-time limousine driver than a part-time independent contractor. Additionally, it placed the coverage requirement solely on the rideshare company—an economic burden that would have increased these businesses’ operating costs, to the detriment of consumers.
Fortunately, that model did not prevail. Instead, the automobile insurance model adopted around the country was one that ensured adequate consumer protections but permitted the insurance industry to innovate. The industry has responded with dozens of options, and they continue to iterate and improve their offerings.
A one-size-fits-all approach to insurance coverages will rarely work. As insurance is further developed for technology platforms that utilize independent contractors to deliver products or services, key stakeholders such as regulators, legislatures and the technology platforms themselves should consider a product that balances substantive coverage but remains dynamic and responsive to rapidly changing business. Occupational accident insurance is a coverage for independent workers that is worthy of a closer look.