Uber Technologies Inc. is an American multinational online transportation network company headquartered in San Francisco, California. It develops, markets and operates the Uber mobile app, which allows consumers with smartphones to submit a trip request which is then routed to Uber drivers who use their own cars. Consumers pay the drivers through their smartphone app, with Uber taking a percentage of the fare.
Uber’s fares can often be much lower than comparable fares for taxis. The app conveniently displays a map that gives an estimated pickup and travel time, as well as an estimated fare before booking. Uber is now available in over 58 countries and 300 cities worldwide.
Uber launched in Edmonton in December, 2014 and in Calgary in October, 2015 and quickly became popular for its convenience and price. Concerns were raised, however, over Uber’s driver screening process and insurance coverage. Uber drivers used their personal vehicles under their personal automobile insurance policies while they were operating in these cities. As commercial vehicle insurance is generally more expensive than personal vehicle insurance, most Uber drivers did not inform their insurers they were driving for Uber, and did not adjust their coverage. Insurers will not generally extend coverage to people who are operating their vehicles for hire.
Uber was quickly shut down in Calgary by city council, which later set strict bylaws for ride-sharing in the city. Calgary’s bylaw requires ride-sharing drivers to have a Class 4 driver’s license — a commercial license. It also requires an annual $220 operating license from the city, regular inspections, proof of eligibility to work in Canada and a police background check. Uber officials have complained that these rules are far too onerous, and claim they will not be able to operate in Calgary as a result.
Uber has been the subject of ongoing protests and legal action from taxi drivers, taxi companies, and governments around the world who are trying to stop Uber from operating in their areas. These groups say that Uber presents unfair competition to taxis because the company does not pay taxes or licensing fees; it endangers passengers; and drivers are untrained, unlicensed and uninsured.
There has also been some controversy around Uber’s fare policies. As all Uber drivers are independent contractors, the supply of Uber drivers at any given time is dictated by how many drivers choose to make themselves available to accept fares. Uber uses a model called “surge pricing” to encourage more of its drivers to work during busy periods. Surge pricing will multiply the standard fare paid by users in periods of high demand. Unfortunately, the use of surge pricing hasn’t always been clear, resulting in some surprises when customers view their final bills. On New Year’s Eve last year, surge pricing resulted in some Uber customers being charged fares in excess of $1,000 for what would normally have been a $90 trip.
Uber currently maintains a $5 million Commercial General Liability (“CGL”) policy with AIG Insurance Company of Canada. This is a contingent insurance policy, and will only kick in if there is no other policy responding.
Aviva was the first company in Canada to introduce insurance policies specifically tailored to the ride-sharing industry. They launched their ride-sharing insurance policy in Ontario in February. The policy fills the gap between personal and commercial vehicle insurance, allowing policy holders to use their personal vehicles to drive for Uber. There are some restrictions in Aviva’s policy, such as: the maximum number of passengers, the driver must be licensed for a minimum of six years, and the vehicle is not to be used for any other commercial purpose. For an additional premium of approximately $500 (depending on risk factors) drivers may use their personal vehicles for Uber for up to 20 hours per week, with additional coverage possible.
Similar policies are expected to launch in Alberta in the near future, but it remains to be seen whether Uber will lift its suspension at that time. Uber officials have complained that the new bylaws passed by Edmonton and Calgary will add too many expenses to Uber drivers, making it economically unviable.
As mentioned earlier, a new ridesharing company, TappCar, stepped into the Edmonton market following Uber’s suspension of services in February. Like Uber, TappCar uses an app allowing customers to reserve and pay for rides on their smartphones. Unlike Uber, TappCar drivers have full commercial insurance and are in compliance with Edmonton’s ridesharing bylaws. Uber’s suspension of services has given TappCar the opportunity to grab market share from Uber before the new ride-sharing insurance regulations are put in place in the summer, making Uber’s return to Edmonton unsure.
Similarly, Calgary is now in the midst of a price war between its taxi companies. Calgary’s new vehicle for hire bylaws have removed minimum and maximum rates, allowing local taxi companies to start undercutting one another. A collapse in fare prices may eliminate some of the demand for Uber, and combined with the strictness of Calgary’s new bylaws, makes Uber’s return to Calgary far from certain.
In any event, particularly in Alberta’s current economic climate, the introduction of ride-sharing insurance regulations this summer will still likely have a strong effect on the insurance and taxi markets. The recent uptick in unemployment has left many Albertans looking for ways to earn a living outside of traditional employment. Ride-sharing allows anyone with a vehicle the opportunity to take advantage of an expensive asset that normally spends 95% of its time parked in parking lots or driveways. Ride-sharing drivers will potentially be using their vehicles three to four times more than they normally would, and insurers must be alive to the risks. Additionally, more monitoring of these drivers may be needed to ensure they operate within the limits of their policies.
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