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Frankenmuth Mutual Insurance Commercial Lines Intern Presentation 2015: Insurance Hot Topics: Ride-Sharing

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Hailey Willett

on 3 August 2016

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Transcript of Frankenmuth Mutual Insurance Commercial Lines Intern Presentation 2015: Insurance Hot Topics: Ride-Sharing

Michigan Ride-Sharing Legislation to Watch
Michigan lawmakers have begun to recognize a need for regulation of ride-sharing in our state, with a high-priority focus on challenges in adequate auto insurance coverage.
Recently introduced House Bills:
HB 4637
- Creates a new "Transportation Network Company Act." Provides for the regulation of TNCs and TNC drivers.

HB 4638
- Amends the Limousine Transportation Act to exempt TNCs from regulation under this Act.

HB4639 - Amends the Insurance Code to allow insurers to exclude coverage under a personal auto insurance policy for accidents or injuries occurring during TNC activity.

HB4640 - Amends Sec. 3114 of the Insurance Code to provide that insured passengers injured in a TNC vehicle go to their own auto insurance policy first, rather than aggregate to the car they are in.

HB 4641
- Amends the Michigan Vehicle Code to exempt TNCs and TNC drivers from the definitions of "chauffeur" and "commercial vehicle."
Courtesy: Insurance Institute of Michigan,
IIMpulse
publication, May 2015.
Our same contractor has the Drive Other Car (DOC) Endorsement
.

There is no Personal Auto Policy in the contractor's household.

The contractor's son is an Uber driver and decides to take the company auto out to pick up passengers.

While driving a rider to her destination the son gets into a car accident and injures the Uber passenger.

Who provides coverage?
Scenario 1
A contractor has downtime during a slower season and decides to use Uber to earn extra cash.

Contractor takes out his commercial auto and begins driving for the popular TNC and picks up a passenger.

Contractor gets into an accident that results in bodily injury to the passenger.

Where does the passenger go for coverage?

Does the Business Auto Policy provide coverage for the damaged vehicle and/or bodily injury
?
Scenario 2
A contractor has downtime during a slower season and decides to use Uber to earn extra cash.

Contractor takes out his commercial auto and begins driving for the popular TNC.

Contractor is operating his commercial auto and waiting for a rider request (he is currently online in the Uber app, and the only person in the vehicle).

Contractor hits a pedestrian while driving and active in the app, looking at his phone for a rider request.

If DOC (Drive Other Car) is in place how does coverage respond?
Scenario 3
Covering the Insured: How the Commercial Auto Policy Will Respond
Uber in the U.S.
Policy Considerations for Frankenmuth Insurance
Questions?
What is Uber?
A "ride-sharing" company that connects its users with local independent drivers using GPS through a smartphone app.
Founded in 2009

Heavily West Coast-based, with locations in 58 countries

Lansing, Grand Rapids, Ann Arbor, Detroit and Kalamazoo recently gained Uber services

Classified as a "TNC," or Transportation Network Company
How Uber Works
Users simply request a ride and pay via their mobile phone.

Additionally, five vehicle-grade options are available for users to choose from:
uberX
uberTAXI
UberBlack
UberSUV
UberLUX

Payment is automatically calculated and deducted based on the fares of the city you're riding in.
Commercial Lines Intern Presentation
Presented by Josh Gardner, Hailey Willett and Kyle Ranney
Frankenmuth Mutual Insurance, June 2015
Going From 0-60:
Ride-Sharing and the Insurance Industry

courtesy: youtube.com/user/UberWorldwide
Who is Using Uber?
Ride-Sharing Regulation
Since its inception in 2009, Uber has expanded its services across the country in many U.S. major cities.
Territories: Uber and Frankenmuth Insurance
According to Uber's recent services map, the popular TNC is now present in each of the states that Frankenmuth has historically written business in.
The Michigan Insurance Industry Response
The Insurance Institute of Michigan (IIM), a government affairs and public information association, has been on the forefront of analyzing the adequacy of Uber's insurance coverage specific to Michigan's No-Fault requirements.
In July 2014, an Uber spokesperson stated that the ride-sharing company's subsidiary provides commercial auto insurance for its driver partners, in addition to protection that meets Michigan No-Fault needs.

IIM stated concerns that "when the owners of private vehicles take passengers onboard for pay, they could be acting outside of what their auto insurance covers."

In other words, there is a risk for insured misrepresentation under their personal auto insurance policy.
Final Conclusions
"The key to wisdom is knowing all the right questions."
John A. Simone, Sr.
160,000
Number of drivers who partnered with Uber in 2014.

$656.8 million
Amount in payments made to Uber drivers in the last quarter of 2014.

$19.04
Average hourly wage an Uber driver earns.
Build Insurer Awareness
Educate your staff on what the exposures are and how to properly identify them.

Incorporate up-front question fields onto applications to document whether risk partakes in TNC activity or not.
Ask upon
renewal
of commercial and personal policies when applicable.

Protect yourself
Have strong policy language that will defend you in a court of law.
Understand how your policy will respond in the event of a claim.
Monitor statutory and regulatory laws going into effect within the company's territories.

Frankenmuth Insurance's Commercial Auto Policy
Currently Frankenmuth Insurance uses ISO forms for business auto.

There is no exclusion of taxi service or livery in the ISO form.

ISO is currently working to update its forms to address the growing changes in the transportation industry.
Drive Other Car
California was the first state to enact legislation in 2013 that regulated Uber and competitor services, recognizing them under a new classification called "Transportation Network Companies" (TNCs).
Highlights of the new provisions passed by the CA Senate in AB 2293
:

Establishes a personal insurance firewall to ensure personal insurance auto policyholders will no longer cover the commercial activity of TNCs, beginning July 1, 2015.

Lowers the primary insurance coverage requirement in the timeframe formerly known as, “App On to Match,” to: 50/100/30 with excess coverage of $200K.

Ensures California Public Utilities Commission oversight of TNCs, such as Uber and Lyft.

Expedites the approval process for new TNC insurance products.

The Drive Other Car (DOC) endorsement will extend the coverage of the Commercial Auto Policy if there is no Personal Auto Policy in place at the home.
According to the ride-sharing giant, there has been growth in the diversity of drivers choosing to get behind the wheel as an Uber partner.
Nearly
20% of college students
(under age 30) have partnered with Uber as drivers.

A reported
25% of retirees
have partnered with Uber as drivers.

As of 2015,
14% of women
are Uber drivers, while
86% are men
.

70% of Uber drivers have dependents
(children, elderly parents, etc.)
living at home
with them, while
30% of drivers claim themselves as independents
.
Pictured: Uber's current insurance coverage eligibility for its driver partners in the U.S.

The company says that they provide for Michigan PIP and $1,000,00 property protection insurance in addition to the $1,000,00 per incident coverage for third party liability and other coverages available in all Uber states.
Since these developments, IIM has continued to remain active in following new ride-sharing updates and communicating these through their member newsletter, the
IIMpulse.
Courtesy: http://www.mlive.com/lansing-news/index.ssf/2014/07/state_insurers_to_rideshare_ap.html
Defining "Sharing"
Ride Sharing
Vehicle Sharing
VS
A term generally referring to a "peer-to-peer service" that enables the arrangement of vehicular transportation services, often on short notice, using smart phone applications.

The main focus is sharing empty seats in cars.

Ride-sharing has evolved into two types:
Carpooling
Taxi service-like ventures, but involving a private car and not a formal taxi company.
Refers to when the owner of a car makes his or her car available for use to people who want to use a car.

Example 1: A teen wants to use their parents' car.

Example 2: Peer-to-peer car-sharing online marketplace "RelayRides" allows one to find a car to rent from someone in their neighborhood.

Car-sharing between family and friends is usually informal and free, while peer-to-peer car-sharing between strangers allows for more sharing options and usually requires a fee.
Objectives
Defining "Sharing"
What is Uber?
How Uber Works
Uber in the U.S.
Uber and Frankenmuth Territories
Exposure Considerations
Ride-Sharing Regulation
MI Legislation to Watch
Insurance Industry Response
Policy Considerations for Frankenmuth
Applying Concepts: Scenarios with Uber
Final Conclusions
Questions
Uber Concerns: Exposure Considerations
Lack of insured reporting as part-time, full-time Uber driver

High-risk drivers behind the wheel as Uber partners

Passenger exposure

Insured movement into higher rated territories

Phone-use while operating a vehicle

Use of private passenger vehicle as commercial auto, due to nature of service

Uber, and other TNCs, are not considered to be part of FI's appetite
Each underwriting line/region is affected, most notably Commercial Lines, with these changes.
Uber drivers are now required to carry limits of 50/100/25 and a combined single limit for all bodily injury or property damage if operating in the state of Michigan.
As a result of these amendments...
Uber Concerns: Underwriting Considerations
Lack of insured reporting as full-time, part-time driver partner

High-risk driver demographics

Movement into higher rated territories

Phone-use within app while on the road

Use of private passenger vehicle as a commercial auto

Uber and other ride-sharing entities are not within Frankenmuth Insurance appetite
Full transcript