Americans in an estimated 42 states use personal vehicles to provide rides for hire—a result of the ever-increasing sharing economy. In an industry fraught with risk, Erie’s new ridesharing coverage takes a new spin on an old approach.
PRODUCT: Ridesharing coverage (personal auto, business use)
COMPANY: Erie Insurance
BEST RATING: A+ (Superior)
AVAILABILITY: Coverage is available through agents appointed by Erie.
FOCUS: Americans in an estimated 42 states use personal vehicles to provide rides for hire—a result of the ever-increasing sharing economy. This cottage industry of transportation networking involves three big companies (Sidecar, Lyft and Uber) that all are at least two years old and operate in 10 or more cities.
But it’s an industry fraught with risk. While regulators are looking to impose insurance requirements, many ridesharing drivers aren’t quite sure what’s insured, if anything.
Erie Insurance has found a shortcut to coverage with a new use of an old approach: It’s covering ridesharing drivers “before, during and after” they collect fares by designating their personal lines auto policies for business use.
“Our target is to close the gap for coverage for drivers of ridesharing companies,” says Cody Cook, auto product vice president for Erie, which serves 12 states. “We’re using a traditional class called ‘business use.’ For customers that have the ‘business use’ designation on the insured vehicle, the livery exclusion—which is standard in auto policies—no longer applies.”
Cook explains that historically, it’s been realtors who have used the ‘business use’ classification for coverage when transporting clients to show homes. “We’re expanding the application into ridesharing,” Cook says.
Erie’s product development team rode along with ridesharing operators. “It was startling for them to hear about the coverage gaps,” Cook says, noting many were unaware that their personal auto and ridesharing company-provided coverage left them exposed. “We saw the significant need and saw an opportunity to close the gap.”
UNDERWRITING: Erie is starting up its coverage in Illinois and Indiana. “It’s a pilot for us,” Cook says. “We want to engage with customers and see what happens. It’s a dramatically growing industry.”
A key characteristic among the target market of ridesharing drivers is newer vehicles. “Ridesharing companies want newer cars, typically five years or newer,” Cook says. “After all, these cars form the brand of their companies. That’s the only real consistent thing about the drivers.”
The ridesharing coverage has the potential to boost premiums. “We simulated this on some of our book of business,” Cook says. For most people, the premium increases about 30-35%.
Erie believes its approach is the first of its kind—and that the innovation dovetails well with the independent agent’s business model of helping consumers find the right coverage “The good thing about ridesharing for independent agents is that it drives home what they say about insurance: It’s not as straightforward as some advertising says,” Cook explains. “That’s why we believe in the IA channel. Local agents can tailor products for exposures that consumers face.”
MINIMUM PREMIUM: None
TARGET: Personal auto customers.
COVERAGE TERRITORY: Indiana and Illinois.
CONTACT: Cody Cook, auto product vice president; Erie Insurance, 100 Erie Insurance Place, Erie, PA 16530; 814-870-2179.
Amy Skidmore is an IA contributor.
