At a presentation for would-be Uber drivers attended by BuzzFeed News, a company representative advised getting less-expensive “personal” insurance that can leave drivers uncovered and in some cases lead them to incorrectly register their cars in violation of the law.
Sergio Perez / Reuters
Uber is steering drivers to purchase auto insurance that leaves them uncovered when they're trolling for fares and that often forces them to flout the law by lying when they register their automobiles, according to documents, interviews, and an Uber presentation attended by a BuzzFeed News reporter.
The transit giant has been advising California drivers interested in its low-cost UberX service that personal, rather than commercial, insurance is sufficient to fully cover them and their vehicles. But insurance companies insist that's not the case, and they have refused to pay when Uber drivers have gotten into accidents while on the job. In some instances, Uber's secondary insurance doesn't cover drivers either, effectively leaving them on the hook for medical bills and car repairs.
There's another problem: To qualify for a personal insurance policy in California, a car must be registered with the Department of Motor Vehicles as being for personal use, not commercial use. To get personal insurance, drivers purchasing new vehicles they plan to use for UberX often lie on official state forms that ask whether the vehicle will be driven commercially, according to registration documents, drivers, and auto dealers. Working with lenders, Uber has developed leasing and loan programs that have guided drivers to register Uber vehicles for personal use only.
The DMV says that is improper. "There's not a shade of gray on it," said Andrew Conway, branch chief of registration policy at the DMV. "If you use the vehicle for commercial purposes, even occasionally, it has to be registered as commercial."
He added that anyone who registers Uber cars as personal vehicles is "making a false statement on the report of sale, knowingly."
Insurance is one of the biggest issues at play in the ballooning ridesharing business. Uber, the industry leader, now operates in 53 countries and more than 120 U.S. cities, providing upwards of a million rides per day as it competes with traditional taxi and limousine services, as well as other mobile-app-based services such as Lyft.
As Uber and competing services grow, the San Francisco Chronicle , Forbes , The New Yorker , and other publications have written about the industry's insurance problems. While most of the focus has been on drivers acting alone to conceal their activities from insurers, BuzzFeed News has found that Uber steers some drivers to purchase policies that put them at risk, and that leads them to register their vehicles incorrectly.
While Uber offers limousine services that carry commercial insurance, much of its growth has been fueled by the UberX program, which allows virtually anyone to use their own car for hire. Some drivers have little experience with passenger transportation and rely on Uber to direct them on critical issues including insurance.
On a recent rainy Friday morning, Uber drew current and would-be UberX drivers to a Los Angeles auto dealership with the promise of free pizza and the opportunity to get a new car through its financing programs. (In fact, no pizza was provided.) More than a dozen men and women attended the session, one of many that the company has been holding around the country in recent months.
As Uber employee Alanna Nass clicked through a PowerPoint, a would-be driver asked what insurance is required for UberX. Nass was unequivocal. "You don't need commercial insurance," she said. "When you're on an Uber trip, you're covered by us."
In fact, while Uber has expanded the scope of its own insurance policies over the past year and now carries $1 million in liability protection, there are still significant holes in its coverage.
Uber's policy covers drivers once they have been matched with a fare and when they are carrying paying passengers.
But there's a period of time when Uber's insurance may cover third parties but does not cover its drivers at all: when they are logged into the Uber app, waiting to be matched with a fare. During this trolling period, Uber leaves drivers in the lurch.
Uber maintains that isn't a problem, because drivers' personal insurance will cover the trolling period. The company's website claims that "during the time that a ridesharing partner is available but between trips, most personal auto insurance will provide coverage." In response to queries last week, Uber maintained that "when the app is on but no ride has been accepted, many personal policies provide coverage."
Not so, say Allstate, State Farm, Progressive, and Geico. Those companies insist that their policies do not cover ridesharing activities of any type, including when the driver is logged in to the app but has not been matched with a fare. Indeed, they have denied such claims, and some have begun canceling policies of people found to be driving for rideshare services.
If an insurance company determined that a driver got in an accident while trolling for a fare, it could decline to pay, leaving the Uber driver entirely responsible for any medical treatment that he might need. The driver would also have to pay for any damage to his or her own car.
What's more, anyone not in the Uber car injured during such an accident could also be at financial risk. That's because Uber's third-party bodily injury liability insurance for the trolling period, which kicks in if the driver's policy won't pay, is capped at $50,000 per person — far less than what a serious injury might cost in medical bills.
Lyft carries insurance that is very similar to Uber's, the company said, including a secondary policy in the trolling period with medical liability up to just $50,000 per person.
In online forums, UberX drivers involved in accidents during the trolling period frequently seek advice on their insurance. In many cases, other Uber drivers advise them to lie to their insurers to avoid losing their personal policies altogether. And some drivers have said they concealed their commercial activities when applying for insurance in the first place.
Chris Shultz, deputy commissioner of the California Department of Insurance, said law enforcement officials are increasingly concerned that the way rideshare companies advise their drivers to handle insurance could "force otherwise law-abiding people to commit insurance fraud."
The state has been encouraging carriers to develop special "hybrid" policies that would explicitly cover rideshare activities, but so far only one policy is available nationwide, and none in California.
Of course, there is already a product on the market that would put all insurance concerns to rest: commercial livery insurance. Required for taxis and limousines, as well as the limo-style UberBlack service, it provides round-the-clock protection — including collision, uninsured motorist, and medical. But because it costs between 3 and 10 times more than personal auto coverage, many drivers say it's unaffordable under UberX's current rate structure.
The high cost of commercial insurance creates a dilemma for Uber, which has been aggressively recruiting UberX drivers in order to flood markets with thousands of drivers and win market share from competitors. Simply put, advising drivers to purchase commercial insurance could lead many of them to decide against working for Uber in the first place.
In the past year, Uber has begun expanding its recruiting push by partnering with lenders to provide loan and lease programs to help drivers with bad credit get new cars. But some of those programs encourage drivers to register their cars for personal use and obtain personal insurance, documents and interviews show.
In July, Scott Eddy of San Diego acquired a 2014 Toyota Avalon Hybrid through the leasing program Uber runs with lender Santander Consumer USA. Laid off from his IT job five years ago, his credit had been severely damaged, and he'd previously had a car repossessed.
The Uber program requires no credit check. Eddy, eager to work, signed a lease obligating him to pay more than $1,200 a month for 52 months, or a total of more than $66,000 for a car with a sticker price of $41,000. The lease contract requires him to use the car "exclusively for business and commercial purposes as a livery vehicle to meet riders' requests conveyed through Uber during the term of the lease."
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