Lyft, Uber and other ride-sharing companies may be new, but they have unleashed an age-old debate. As the newcomers soar in popularity with consumers, established interests cry foul and unfair competition. Unable to win in the marketplace, taxis, insurance companies and their allies have turned to legislators and regulators to crush the innovative ridesharing model that has created thousands of jobs, expanded consumer choice and removed thousands of single-passenger vehicles from California roads. Those threatened by the advent of ride-sharing, much like the opponents of “horseless carriages” more than a century ago, are engaging in scare tactics intended to make ride-sharing seem like a dangerous craze, rather than the viable and thriving new transportation model that it is.
Opponents of “Transportation Network Companies,” or TNCs, would have you believe a parade of horribles will ensue if the newcomers are given license to keep delighting consumers, creating jobs and reducing pollution. Their most persistent myth: an “insurance gap” that supposedly renders TNC drivers uncovered if they are involved in an accident while their ride-matching apps are turned on. Opponents claim that unsuspecting TNC drivers could be found personally liable in the event of an accident.
It’s time for the facts: Companies like Uber and Lyft provide $100,000 commercial liability coverage starting the moment a driver turns on the app allowing them to find passengers. That coverage increases to $1 million once a match is made between a passenger and a driver and throughout the duration of the ride, until the passenger exits. By comparison, the state requires taxis to carry a minimum of only $30,000 in liability insurance. Looked at another way, TNCs provide 30 times the minimum coverage for drivers that taxis are required to carry. Those traveling in a ride-sharing vehicle have better coverage than they do in their own cars much of the time.
Then, there is the broader safety argument. When it comes to personal safety, Lyft and Uber drivers, for example, must undergo rigorous background checks, extensive screenings, driver training, and vehicle inspections. All rides are tracked start to finish by GPS. Furthermore, TNCs have a zero tolerance policy for drug and alcohol use. Ride-sharing apps include a two-way rating system, which means that passengers and drivers both know who they are dealing with. There is no need to hail down an anonymous ride from the street. And with phone and text contact between driver and passenger, there is no need to wait outside in a dangerous neighborhood for a ride to arrive. Furthermore, there is no cash involved in the transaction.
Despite these advantages, the California State Senate is considering legislation that would arbitrarily increase the amount of insurance TNC drivers carry to close to $1,000,000 at “app on” – regardless of whether the driver is waiting for a call, or taking her child to daycare. Those extra costs will be borne by the drivers, in essence imposing a tax on people who may have just been able to enter the workforce as is the case with many TNC drivers. Even a mildly progressive public policy would favor job growth for the people who find TNC employment the best job they can get given their personal circumstances, for instance a single mom who organizes her driving schedule around available childcare.
These facts put the proposal to impose high insurance requirements on TNC drivers for periods when they are not answering a call or transporting a customer in context. The proposal, for no good insurance reason, reduces the number of jobs available to just the types of workers who most need them. The debate, no matter how opponents try to frame it, is not about insuring victims, but a bald claim by incumbent industries that does nothing to improve the public’s safety.
It’s clear that California’s Internet economy is strong and here to stay. Stifling innovation, and forgoing all the economic and consumer benefits it provides, is not an option.
Michael Beckerman is the President and CEO of The Internet Association, the unified voice of the Internet economy.
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