Peer-to-peer, mobile app-based ride-sharing services have become popular over the last few years. But instead of submitting to the same regulatory and insurance requirements as taxicabs and limousines, Uber, Lyft and similar businesses are going against the grain, creating headaches for lawmakers by claiming to be strictly technology companies.
But what ride-sharing companies provide through their respective apps is no different than what a dispatcher does for any taxicab company. Instead of a phone call to get a ride sent to them, users do it themselves, cutting out the middle-man. On one hand, you have to admire the determination of start-ups challenging the status quo with a creative new business model. On the other hand, the service ultimately provided through that app is clearly a commercial activity – providing transportation for a fee.
Using a ride-sharing app is a way to hail a “cab” without talking to anyone. That’s really all there is to it. The technology is a high-tech replacement for the phone call and dispatch work involved in hiring a taxi. Annapolis, Md., got it right earlier in July when Mayor Mike Pantelides expressed reservations about carving out a niche for transportation network companies (TNCs) to remain unregulated.
“I am happy to know there is another means of transportation that will help increase our city’s mobility efforts, but I [must] also be diligent in insisting that they are regulated, just like our taxicabs, in an effort to keep our citizens and visitors safe,” Pantelides said in a statement.
Cities have differed in their approaches, however. Some, such as Minneapolis, recognizes TNCs as distinct from taxicabs and created a specific licensure program for them. Baton Rouge, La.; Chicago; Columbus, Ohio; and Seattle have passed similar legislation.
I can’t help but think those communities got too caught up in the excitement of having new transportation options at their disposal when carving out a new set of rules for ride-sharing. Sure, it’s pretty cool to jump on your smartphone, hit up an app and pick out your ride. It’s easy, at times cheaper, and depending on the situation, presumably more convenient to get a lift home or to another destination. But the way transportation is requested doesn't change the fact that it's transportation.
Uber’s rationale for why it considers itself a technology company is simple – it doesn’t own any cars or directly employee drivers. In an email to Government Technology on July 22, Lane Kasselman, a spokesman for Uber, categorized what the company offers as a “new paradigm,” where it strives to improve accessibility and provide “more possibilities for riders.”
But the bottom line is that a person is paying to be brought from point A to point B. That’s commercial activity, no matter how the ride is arranged. If taxis and limos abide by one set of regulations because of that activity, why shouldn’t Uber, Lyft and the rest of the TNCs? They are providing the same service through a proxy, using a different scheduling method.
In addition, there are a number of complicated insurance questions that the TNC business model has unearthed. Drivers operate under their own personal insurance policies, which usually don’t support commercial activity. And while TNCs all carry excess contingent liability insurance coverage, when it kicks in can vary depending on the company, and – more importantly – the specific situation a driver is in.
The ride-sharing companies have strict lines on when they consider a driver to be “working” and covered under their insurance policies. Lyft recently amended its policy from being “excess” to “primary” from the point where a driver accepts a ride request until the ride is ended in their app. But after speaking with Bob Passmore, senior director of Personal Lines Policy with the Property Casualty Insurers Association of America (PCI), last month, he made it clear that a number of coverage gaps remain, and that has the insurance company concerned.
For example, if a driver is displaying the Lyft mustache or Uber medallion and spots someone looking for a ride, isn’t logged into one of the TNCs’ respective apps to accept it, but does it anyway and pockets the money, it’s possible no insurance policy would cover the situation. There’s also a question regarding whether a TNC’s insurance will cover damages if a vehicle is involved in an accident – particularly since a driver’s personal insurance policy typically exclude commercial activity.
States are attempting to legislate a solution to the insurance gaps, but much like the different decisions reached regarding regulating TNCs in cities, states such as California, Colorado and Illinois all differ with their approaches, causing confusion. There’s wouldn’t be so much confusion if TNCs were treated as taxicab companies, however. The insurance expectations are cut and dry for that industry.
Uber, Lyft and other TNCs want people to believe that they’ve brought something new to the table – and to a degree they have. They’ve helped increase transportation options for people. It’s plainly obvious that if forced to submit to taxicab regulations, the TNCs’ business models would likely change, as more money would have to be spent on insurance and whole host of compliance costs depending on the city the companies are operating in.
But TNCs haven’t created a new industry, distinct from taxicab and limousine companies. They’ve simply made access to ride-for-hire services more convenient and independent through mobile technology. Are they a de facto cab company? Of course not. But while TNCs may not own a fleet of vehicles or directly employ drivers, they do profit from commercial transportation services that are provided as a result of their technology.
If TNCs were only profiting off the sale of a piece of technology, the argument that they are just tech companies would hold more water. But that’s not the case. Uber, Lyft, Sidecar and other spin-offs make money off of the rides by taking a percentage of the fares. Just because TNCs have modernized the way a ride is scheduled doesn't mean they're entitled to a new set of rules exempting them from the responsibilities associated with commercial transportation.