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Rideshare Drivers Increasingly Committing Insurance Fraud

As the Uber/Lyft/Sidecar insurance saga continues to unfold, it seems yet another issue has come to the fore. Recently, an assistant district attorney in San Francisco told state regulators that there has been an increase in insurance fraud among drivers for these rideshare companies, who seek compensation from their personal insurance carriers for damages incurred in work-related accidents.

It's not difficult to imagine why these drivers would be compelled to seek compensation from their personal carriers. Although I have written extensively about rideshare companies on this blog, one thing I have neglected to mention is that the $1 million insurance policies these companies provide only cover passengers and third parties, not the driver or their vehicle. So, when drivers get in anaccident while on the job, they turn to their personal insurance carriers to help with the damages for their injuries or for property damage to their cars. Of course, these personal policies don't cover accidents in which the car was being used for commercial purposes, so herein lies the central issue.

Then there's the "insurance gap," which I wrote about a couple weeks ago. Until just a couple weeks ago, rideshare company insurance policies would not cover accidents that occurred when a driver was logged into the company's cell phone app but did not have a passenger in the car. Uber, Lyft and Sidecar all just announced "contingent" coverage for these instances, but it isn't enough to cover a serious accident, so drivers may still have a greater incentive to lie to their personal insurance carriers.

Another type of fraud that has increased recently is rate evasion, which involves lying about driving for a rideshare company to avoid having to pay increased insurance premiums. At this point, insurance companies don't have any methods for discovering whether or not a customer drives for Uber, Lyft, Sidecar, or one of the other competitors. Unless a driver tells them outright that they use their car for commercial purposes, which for obvious reasons they are not likely to do, then insurance companies really have no way of knowing the truth. This is not a good state of affairs. Insurers may try to avoid providing coverage if they were lied to in the application. My suggestion to drivers is to assume their insurer will deny coverage if they are in an accident before choosing to lie on an application. That state of affairs will be much worse than paying the added premium.

Needless to say, it's certainly an interesting time for rideshare companies and insurance carriers alike. Both parties need to get smarter and more realistic about the insurance options they're providing their employees/clients. Uber and its competitors need to take responsibility for the policies that are forcing drivers to commit insurance fraud.

Likewise, insurance companies need to come up with riders or other options for these drivers so that they won't feel that fraud is their only option. Insurers would be smart to develop affordable options for hybrid personal-commercial vehicle use. It could be a long time before these types of policies become widespread, and affordable enough to be practical for these drivers.

Do you drive for Uber, Lyft, Sidecar, or another rideshare company? If so, have you run into complications with your insurance carrier or the company's insurance policy? Please share your experience in the comments section.

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