Over the past few years, Uber, a popular ridesharing company, has expanded its operations into a handful of Canadian cities. While drivers and passengers cite ridesharing as a cheaper and more convenient alternative to traditional taxi services, the industry is not without risks.
Before signing up to become a rideshare driver or using the service as a passenger, it is important to understand how ridesharing works and the risks associated with the industry.
How Does Ridesharing Work?
Uber and other rideshare companies connect ride-seekers to drivers through a mobile app. After a match has been made, drivers pick up their passengers and transport them to their desired destinations. Fares vary by city, but typically consist of a base fare and fees per kilometres and minutes driven. Passengers have to enter credit card information into the app before rides can be requested. Their credit cards are then charged for the rides once they reach their destinations, and the rideshare company compensates the drivers. No cash is ever exchanged.
Becoming a rideshare driver, especially through Uber, has become a popular option for those seeking full- or part-time employment. This is because the company allows its drivers to create their own hours, and, for the company’s UberX drivers (drivers of the most-used and least expensive Uber service), no special licensing is required—unlike the company’s UberBLACK drivers, who have a commercial license and are covered by commercial insurance. In addition, UberX drivers only need to be 21 years of age or older, pass a background check and provide their own vehicles and auto insurance.
However, because UberX drivers must use their personal insurance, they are unknowingly opening themselves up to a number of risks.
Personal Auto Policies Don’t Cover Commercial Activity
The biggest risk facing Canadian UberX drivers is that their personal auto insurance policies could fail them in a time of need. Under most standard personal auto policies in Canada, drivers are prohibited from engaging in commercial activities (renting or leasing out a vehicle, transporting passengers for pay, etc.).
As it relates to ridesharing, personal auto insurance polices are not designed to provide adequate coverage when vehicles are used to transport passengers for compensation. For this reason, UberX drivers who rely solely on their personal policies for accident coverage could, in fact, have insufficient or even no protection in the event of an accident.
In the United States—where Uber is based—some insurers have created hybrid policies that allow drivers to switch between personal and commercial coverage. However, no such coverage currently exists in Canada.
Misleading Your Insurer Can Have Consequences
Misleading your insurer—accidentally or purposely—can result in serious implications. For UberX drivers, there are two main ways drivers often mislead insurers:
In either case, UberX drivers who mislead their insurers could have their auto policies voided from inception without warning, leaving them without coverage.
Uber’s Contingent Insurance Policy May Be Insufficient
Uber states that every ride initiated through its UberX platform is fully insured under the company’s $5 million contingent insurance policy and that the policy covers bodily injury and property damage. However, regulators and insurance experts have warned that this supplementary coverage is insufficient and is not compliant with insurance laws across Canada.
The problem, experts say, stems from the fact that Uber’s insurance is a non-owned automobile liability policy that only provides coverage if Uber is proven to have been negligent. Essentially, the policy is meant to protect Uber from liability, but cannot shield drivers from damages.
What Happens in the Event of an Accident?
In early 2015, a Toronto UberX driver got into an accident that totalled his vehicle and sent him and his passenger to the hospital. When the driver tried to file a claim, he was told that his insurance had been voided because he was transporting passengers for pay. Meanwhile, Uber’s contingent insurance policy did not apply—forcing him to absorb the cost of his injuries and the cost of damages to his vehicle.
This is just one example of what can happen if you get into an accident as a driver for Uber. Neither Uber’s policy nor your own personal policy can offer sufficient coverage, leaving you without access to accident benefits, collision coverage or third-party liability coverage.
These risks are not only a concern for drivers, but for passengers as well. If you get into a car with an UberX or other rideshare driver who is not properly insured and that driver gets into an accident, you risk having no access to insurance protection, accident benefits or potential compensation for injuries. Passengers would have to take the driver to court in order to receive restitution for any legal or medical costs—a costly and time-consuming process.
How to Reduce Your Risk
For passengers, mitigating the risks associated with ridesharing is simple. Before a ride, passengers should ask the rideshare driver to provide proof of commercial insurance, as this is the only type of insurance in Canada that can sufficiently protect you in the event of an accident.
For those considering becoming an UberX driver—or a driver for any other rideshare company—there are a number of precautions you can take to limit your risk, including the following:
Every province has slightly different laws and regulations as it pertains to insurance. If you’re looking to work as a rideshare driver, contact Lloyd Sadd Insurance Brokers Ltd to talk through your options and to ensure that you are properly covered.