However, with most personal auto policies, ridesharing can trigger a livery exclusion. Driving for profit creates greater risks. The cars drive higher miles. More unfamiliar areas are traveled. Increased exposure to multiple, unknown passengers.

With this new risk, carriers are paying costly injury and property claims because some drivers aren't revealing their rideshare employment. And the drivers are warning their peers through chat rooms and social media.

According to a November 2016 Reddit blog, a contributor advised:

“Don't let your insurance company know that you're driving for Uber. They did not underwrite the policy for that, and they'll want you to pay for extra coverage…”

Potential for insurance and application fraud

According to a Forbes article, 95 percent to 98 percent of the drivers may be hiding the fact they're driving for a rideshare service. A driver said, “It's a whistling-past-the-graveyard attitude.”

A Business Insider article posted results from rideshare drivers:

• 92 percent of the drivers hadn't told their personal carriers about their jobs.

• 72 percent of the drivers were not familiar with the details of the rideshare's coverage.

Carriers, agents and underwriters need to recognize this mindset, since it creates new potential for insurance and application fraud.

Drivers even share advice on how to get claims paid after an accident has occurred. According to a post on UberPeople.net:

“Next time, if you are empty and have an accident, remove all your Lyft/Uber signs, and don't tell your insurance you were doing this if you don't have full coverage…”

The drivers fear they will be cancelled by their own insurance carrier as a result of their misrepresentation. A contributor on the same site warned:

“If you never mentioned you were doing rideshare in the police report, you may want to go with your personal insurance because Lyft won't touch it without that deductible. Whatever you do, don't tell your insurance you were doing rideshare. They will drop you and your insurance will go up.”

Rideshares' policies come with strict guidelines

Ironically, rideshare companies offer generous liability insurance coverage, up to $1 million for injuries. Collision and comprehensive coverage is available under certain conditions. The coverage is offered based on what “period” the driver was in when the accident occurred. Periods are verified based on the pick-up/drop-off times on the rideshare app.

However, the rideshares' policies come with strict guidelines. Just the slightest circumstance can jeopardize coverage. This could tempt drivers to misrepresent the facts to their own carriers to obtain benefits under false pretenses.

(Photo: Shutterstock)

Examples of the “periods”

Here are descriptions of the various “periods” for a rideshare company driver.

• Offline – When the driver's app is turned off. The personal auto policy would insure the driver. Fraudulent exposures could occur when drivers work “off the books,” taking rides for cash, or if they believe their personal insurance is preferable (e.g., lower deductible.)

• Period 1 – The driver is online and available for hire. They're awaiting and seeking ride requests, but haven't received any yet. This could involve heavy driving (circling around) in high-traffic/high-exposure areas that most insureds do not expose themselves to.

• Periods 2 and 3 – The driver has received a request “en route” or transporting riders “on trip.” The rideshare carrier provides liability and limited first-party coverage during these periods. Exposures for fraud arise if the driver believes there's an advantage to going through his own carrier (e.g., lower deductible or losing his ability to work.)

Drivers might submit claims to their personal insurance for fear of losing their permit to drive for the rideshare (“deactivation”) or due to higher deductibles. Uber reportedly has a $1,000 deductible; Lyft's is $2,500.

In addition, the driver may not report the accident to the rideshare company for fear of losing their livelihood. Some drivers believe they don't have a choice. According to one chat room driver:

“I don't recommend calling Lyft in case of an accident…I have a police report stating it was the other driver's fault. But Lyft doesn't care, deactivated my account…They will deactivate you and you can't drive for Lyft anymore. Beware!”

Risk of staged accidents

If any unscrupulous party wished to stage an accident to obtain benefits, what better target than a vehicle with a million-dollar policy? Better yet, with the rideshare app, the origin and destination are known in advance. The perpetrators could plan the pick-up and drop-off points, and the route in between, perhaps in a desolate area.

Inexperienced drivers could be vulnerable to skilled conspirators.

Related: Protecting clients who participate in the sharing economy

(Photo: Shutterstock)

Phantom accidents

Another type of staged loss could occur if the driver reports a loss from a fictitious hit-and-run accident. Again, this exposes the carriers to the rideshare's high limits for the passengers, who might participate as false witnesses.

Questionable app status

Drivers might pursue fares with their app in the “off” position. Imagine an airport or large city where passengers hail cabs. Some drivers have accepted jobs for cash. In an offline status, their personal insurance would come into play, creating a major exposure to any third-party passengers.

Education & recommendations

Carriers are already revising and interpreting their own policies since rideshare businesses are only growing. Educating agents, employees and customers on the differences in rideshare coverage versus personal policies is essential.

To adjust to the new world and minimize any fraud exposure, carriers might elect to insure rideshare drivers — if they disclose the activity during the application or renewal process. The product can then be properly rated.

Many of today's applications do not ask specific questions to reveal the exposure. Perhaps add key questions such as:

• Do you drive for any rideshare service? If so, which one(s)?

• How long have you worked for a rideshare service?

• What vehicle(s) do you use for rideshare fares?

• Do you consider your rideshare service your primary job?

The rideshare industry is not a fleeting concept. The companies are actively recruiting new drivers daily. The drivers themselves have methods to communicate insurance advice online. As an industry, we need to similarly keep up and adjust our processes to remain savvy against any potentially-adverse exposures.

Richard Wickliffe, CPCU, ARM, CLU, ([email protected]), is in leadership in the insurance industry. He enjoys writing and speaking about unique insurance and fraud trends. His articles have appeared in Claims and National Underwriter. In addition, he has published several novels and was just awarded Best Popular Fiction by the Florida Book Awards.

Related: Personal auto policies: 5 questions agents should ask buyers