Tuesday, June 28, 2016

Ride-share companies riding on the American society?

Uber, Lyft and SideCar are companies that provide an app which is downloaded by both drivers and passengers seeking a taxi, to make it easy for them to engage. Traditionally, these companies should be regarded as software companies. However with megabucks riding on the transportation business, these companies have morphed into full-fledged Transportation Network Companies (TNCs), but would prefer to be called as ‘ride-share services provider’.

However, the problem does not lie merely in the nomenclature for these companies. A larger problem is the dubious means employed by these companies to dodge regulatory policies that govern all TNCs. One such regulation pertains to the insurance cover provided to drivers of their cabs.

Lyft is a conventional TNC but Uber works on a sub-contracting model. That is, their drivers are mix of owner-driven personal vehicles (called UberX) and fleet-owned commercial cabs (called Uber).  The fleet-owned commercial cabs are covered by commercial insurance but the owner-driven independent contractors are covered in a different way. Such drivers are offered non-primary coverage with $1 million coverage for driver liability and $1 million to cover uninsured or underinsured drivers. However, this cover only applies when a passenger is being driven.

During times when the cabbie is looking for a passenger or responding to a hail, a much lower insurance cover is provided to the driver:
  • $50,000 injury,
  • $100,000 injury total, and
  • $25,000 in property damage
This means that when cabbies are not driving a passenger around, they are at the mercy of their own personal insurance which puts them at risk.

Thankfully, the Federal and State Governments have woken up to what looks like a scam, and are passing bills to regulate these companies. Two such bills being passed by California state senate are:
  • AB 2293: This would eliminate the double-layered insurance cover for cabbies and require all kinds of TNCsto mandatorily have taxi-like primary insurance. This will protect the drivers against lawsuits for loss of life, and/or injury whenever they are on road, irrespective of whether a passenger is being driven or not.
  • AB 612: A more important bill, this mandates these companies to conduct alcohol and drug tests on drivers at regular intervals of time. Also, no drivers can be contracted, unless a thorough background check is conducted on them.
While the ride-share companies may fall in line on the above requirements, there are other questions to be asked. Do they provide workers compensation;do they pay payroll taxes; are they avoiding the normal costs of doing business; are they taking the American society (not just the passenger) for a ride? Questions one must ask oneself before hailing these taxis.

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