On October 19, 2015, the Division of Insurance (“DOI”) and Governor Baker announced that the DOI had approved its first endorsement for personal Massachusetts auto policies that would provide so-called “gap” coverage to insureds who drive their personal automobiles for transportation network companies (“TNC”) such as Uber and Lyft.
Ridesharing endorsement creates coverage gap for personal automobile insurance policies
The need for TNC drivers using their personal vehicles to have additional coverage results from the ridesharing endorsement attached to most Massachusetts personal automobile insurance policies. This endorsement states that:
We will not pay any claim for injury or property damage under the policy, while your auto is being used in a personal vehicle sharing program. Such programs or the use of your auto by a person other than you or a household member under an agreement and with payment to you. This exclusion does not apply to personal injury protection.
For the more detailed summary of this endorsement see Agency Checklists’ October 7, 2013 article: “New Endorsement Makes It Clear: No Coverage For Personal Vehicle Used In Ridesharing Program”.
45,000 drivers and one hundred and twenty-eight million rides
The Division and Governor’s concern with TNC drivers using their personal autos for ridesharing activities stems from just how quickly these companies have expanded their drivers and users.
On October 26, 2015, Uber posted the following statistics on its blog. The post was to mark the fourth anniversary of its entry into the Massachusetts market:
- Over 1.75 million riders took 28 million trips with 45 thousand driver-partners in Massachusetts.
- Each Friday and Saturday between 10PM and 4AM, Uber facilitates nearly 70,000 trips in Boston. In fact, when the T closes on weekend nights, Uber requests more than double near popular stops like Park Street.
- Uber’s driver-partners have earned hundreds of millions of dollars – including over $200m in the last 12 months alone – while setting their own schedules, on their own terms.
If these numbers are correct, leaving a substantial number these ridesharing vehicles to operate with uninsured “gaps” while on on the public ways of Massachusetts presents a real public protection issue.
TNCs Provide Contingent Bodily Injury and Property Damage for the “Gap”
The insurance situation for TNCs has changed much since questions about personal automobile usage by TNC’s drivers prompted the Division to issue a consumer alert in July 2014 stating:
….all insurers in Massachusetts will deny coverage should an incident occur if you use your vehicle to provide rides to strangers for a fee or other economic inducement.” See Agency Checklists’ July 22, 2014 article: “Division of Insurance Issues Consumer Alert On Ride-Sharing And Car-Sharing Apps.”
In March 2014, for example, Uber published the following chart showing its coverages.
The s0-called “coverage gap” for a ridesharing vehicle is that area where the driver is available for assignments using the Uber app but has no passengers.
Per the chart, Uber provides contingent liability coverage with a $50,000 per person and $100,000 per accident liability policy for the driver’s personal vehicle along with $25,000 of property damage. However, this coverage only appears to apply if the driver’s personal automobile policy does not apply. As stated in Uber’s blog: “This policy is contingent to a driver’s personal insurance policy, meaning it will only pay if the personal auto insurance completely declines or pays zero.”
In Massachusetts, this contingent liability policy probably could never be triggered for a bodily injury claim since under Massachusetts law compulsory bodily injury limits would still be payable notwithstanding that the TNC driver’ s personal automobile policy had a ridesharing exclusion.
Of course, from the TNC driver’s point of view, the purchase of gap coverage would be desirable for excess liability limits, property damage coverage, and collision and comprehensive since these coverages would be subject to their policy’s ridesharing exclusion.
The total ridesharing “Gap” coverage premium may be nothing to write home about
In the official October 19th announcement of the first carrier having had its Ride Share Gap Protection coverage approved, the Division and the Governor “invited insurance companies to submit additional proposals for consideration.”
Whether a number of companies will take the time and trouble to submit their own endorsements is an open question. A review of premium charges for other states, however, where companies offer similar gap coverage gives a monthly charge of 6 to 10 dollars.
Extrapolating those numbers over the market in Massachusetts seems to show that these gap coverage endorsements are not going to be a major premium producing endorsement.
In the first instance, the 45,000 partner-drivers Uber reported appear to be the total number drivers over the last four years. A recent Boston Globe article put the number of Uber drivers in Boston (Uber’s main market in Massachusetts) at 10,000. Either number would also include those who drive for the Uber Black service. These are essentially drivers operating commercial livery vehicles that carry commercial insurance and have no coverage gap issue.
The market for the gap insurance centers itself on those individuals who are using their personal motor vehicles part-time or full-time to drive for Uber, Lyft, or similar TNCs. Even if the number of insureds in the market for this coverage tends towards the 45,000 driver number, the premium involved is not going to be very significant due to the limited exposure and the relatively few number of insureds who might need the coverage.
In other states, Farmers Insurance advertises a gap endorsement for its existing insureds that use their personal vehicles to drive passengers acquired through TNC apps at between 6 to 10 dollars per month.
| Estimated Total Premium for TNC Gap Coverage Endorsement | ||
| Endorsements Sold | Endorsement’ Yearly Premium | Total Market Premium |
| 10,000 drivers | $72.00 | $720,000 |
| 20,000 drivers | $84.00 | $1,680,000 |
| 30,000 drivers | $96.00 | $2,880,000 |
| 40,000 drivers | $108.00 | $4,320,000 |
| 45,000 drivers | $120.00 | $5,400,000 |
Of course, if the Governor’s bill or other competing bills to regulate TNC’s passes the Legislature and is signed by Governor Baker, the premium picture may change. Right now, Governor Baker’s bill requires $1 million in liability insurance. If such a requirement becomes law a fair prediction might be that the TNC’s will extend their existing $1 million coverage limits from when their drivers are actually ferrying passengers to include the period when they are waiting for assignments through the apps.
In that case, the market for this type of gap insurance would simply disappear. As this is still an evolving issue, Agency Checklists will report on developments in this fast moving area as they occur.
