State Farm, the good neighbor insurance company, is trying to be a good neighbor to the thousands of transportation network company (TNC) drivers operating in California.
The insurance giant rolled out a new coverage endorsement in California last month to help fill insurance gaps for its policyholders who use their personal cars to provide rides for a TNC, like Uber and Lyft.
State Farm joins eight other insurers offering similar insurance in the state.
Madison Voss, spokeswoman for California Insurance Commissioner Dave Jones, said the state is pleased to see insurance companies enter the emerging market.
“Commissioner Jones has encouraged insurers to develop auto insurance products for TNC drivers and we are pleased to see one of the state’s largest insurers offer a product that protects drivers, passengers and pedestrians.”
Jones sees more gap insurance options as a good thing for the nascent industry.
“More insurers are stepping up to meet the changing needs of California’s sharing economy,” he said. “State Farm has created a product that closes the gap in insurance coverage and helps protect drivers, passengers and pedestrians when ride-hailing vehicles are on the road.”
The TNC industry is rapidly changing the livery/taxi industry by using the latest mobile technology to facilitate rides for hire. With these new transportation services in the marketplace, drivers are exposed to new risks.
Some industry analysts contend that inadequate insurance has prevented the ride-hailing sector from growing faster because some prospective drivers were fearful of their degree of liability in a crash. In many cases, personal auto insurance policies did not extend coverage to those using personal autos as ride-share vehicles, according to media reports.
Insurance provided by TNCs may be limited in scope and coverage. Personal auto policies generally do not extend coverage to the use of personal cars as taxis or livery vehicles, including their use in TNC services, according to State Farm.
To adapt to changing customer needs, State Farm started offering a TNC Driver Coverage endorsement in California on March 21.
"Adapting and innovating to our customers' changing needs is critical," said Tom Conley, State Farm senior vice president. "This new product is an example of our commitment to our customers and provides them coverage, and peace of mind, when they use their personal cars to provide TNC services."
TNCs in California provide $1 million liability coverage while a paying passenger occupies the driver's vehicle or when the driver has been connected with a passenger and is on the way to pick up that person. However, TNCs provide a much lower limit of liability coverage when drivers are just available for hire and may not provide the drivers with any medical payments, comprehensive, or collision coverages at all. The TNCs may be providing no coverage for injuries to the driver and no coverage for any damage to the driver's personal car.
The new, optional State Farm TNC Driver Coverage endorsement (California) enables a policyholder to have his/her personal auto policy fill in the coverage gaps left by TNC-provided insurance. This cost-effective endorsement provides the driver with the full liability coverage limits(s) he has under his/her auto policy during the period of time when the driver is "available for hire." Additionally it provides the driver with all other coverages applicable to his/her auto policy during all periods of TNC driving.
California customers who drive for a TNC should contact their local insurance agent to learn more about and see if they are eligible for the new TNC-focused coverage.
There are three coverage periods as a ride-sharing driver. Period one: when the app is on and drivers are waiting for a match with a rider. Period two: when the driver is driving to pick that rider. Period three: when the rider is in the car.
For period one, Uber and Lyft will insure $50,000 per person, $100,000 per incident and $30,000 per accident.
During periods two and three, that coverage increases to one-million dollar commercial liability policy. That includes comprehensive coverage if the driver's vehicle has collision coverage.
The coverage during period one is only liability. So if a driver's car is damaged, neither the personal insurance nor the ride sharing companies will pay to fix the car.
State Farm has jumped on board with other insurance carriers to offer options to its customers who drive for Uber or Lyft. A $500 premium would increase to about $550.