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Where a driver's personal coverage leaves off and Uber's picks up

Posted On: Apr. 10, 2016 12:00 AM CST

The traditional real estate mantra of “location, location and location” also can be applied to Uber Technologies Inc.'s approach to insuring its drivers.

“We operate a whole bunch of different businesses in a whole bunch of different geographies and they each need their own solutions,” said Gus Fuldner, head of insurance at the San Francisco-based firm.

“Every state has its own distinct compulsory auto insurance requirement. Essentially, every country has its own insurance requirements” and the requirements vary.

Just in the United States, California has a tort-based system, while Michigan has a no-fault system, which are “very, very different coverage structures,” and “that's just ordinary auto insurance in the United States” before even considering Uber, Mr. Fuldner said.

“We operate under two main regulatory models in the United States,” he said. “The first is either called the limousine or delivery model, and that's where we're contracting with or providing software to limousine or black car or livery drivers.”

While terms vary by city, “those drivers are usually their own independent business” and “buy traditional commercial auto insurance,” he said. “That model is pretty straightforward and standard.”

The other model, for which Uber is better known, is where the driver operates his or her own car, generally on a part-time basis.

Uber's noncommercial driver insurance pays generously, Mr. Fuldner said.

While a typical automobile policy offers $50,000 per injury and $100,000 in the aggregate, Uber provides drivers on a trip with at least $1 million of liability insurance and $1 million of uninsured or underinsured motorist bodily injury coverage, which also covers a vehicle occupant, such as a passenger, said Mr. Fuldner.

Taxis are usually regulated at the municipal level, and in many cases Uber provides coverage for its drivers that is greater than or equal to a taxi in the same city.

“But in many cities in the U.S. that difference is quite significant,” he said.

In Boston, for instance, required insurance is $20,000 per person and $40,000 in the aggregate; in Philadelphia, it is $30,000 per person and $60,000 in the aggregate. “So if you compare that to $1 million for coverage of the same accident, there's really a stark different between taxis and (Uber cars) in terms of protection for passengers, for the public generally, in that you have much higher limits.”

“Our concern has really been on how to build coverage around, first and foremost, protecting the passenger, at a standard that's appropriate for for-hire transportation so a passenger can get into a vehicle and say, "This is insured,' without having to study it further,” said Mr. Fuldner.

“We principally buy insurance from third-party insurers,” said Mr. Fuldner. Uber's U.S. ride-sharing insurance coverage, for instance, is insured primarily through Richmond, Virginia-based surplus lines insurer James River Insurance Co.

“We have made significant use of surplus lines insurance. One of the drivers of that is the surplus lines market is much more flexible than the admitted market to basically adapt to new policy forms and new structures and business models,” Mr. Fuldner said. “I think it would be very difficult for us to have gotten to where we are today without the availability of the surplus lines market ... in how they create coverages to deal with certain new and emerging risks.”

Mr. Fuldner also has spent much of his time educating regulators.

“I think the insurance function here is a bit broader than your typical company focusing on protecting its own balance sheet, so we have spent an awful lot of time with regulators, mostly focusing on education about the ride-sharing model and how insurance works,” he said.

“Regulators have a very appropriate interest in ensuring that consumers are protected and that passengers are protected, and they have questions about that,” said Mr. Fuldner. “Myself or one of my colleagues has met with every insurance department in the United States to explain” how the ride-sharing model works.

With U.S. operations in 45 states and the District of Columbia, the holdout states — Alaska, Montana, South Dakota, West Virginia and Wyoming — have had different legislative calendars and legislative priorities, he said.

Since Mr. Fuldner spoke with Business Insurance, Uber announced that as of April 1 it changed its commercial auto provider in Texas from James River to United Financial Corp., a unit of Mayfield, Ohio-based Progressive Corp., marking the first commercial ride-share product offered by Progressive.