Although there have been fits and starts, California has been a leader in creating a framework that allows ridesharing to thrive. The new industry is especially important in a state facing significant widespread public transportation issues. It makes sense that California wants to get on board with ridesharing.
The California Assembly just today passed a bill that undermines this new industry to the benefit of one of the world’s oldest. AB 2293, introduced by Assemblywoman Susan Bonilla, is a dream giveaway for the insurance industry that provides a peek into how the Internet based economy can come under assault by entrenched special interests seeking to derail innovative technologies.
At its core, Bonilla’s bill will allow insurance companies that have collected millions of dollars in consumer premiums to walk away from those consumers if they have a ridesharing app on in their car. The bill fundamentally misses how the sharing economy works and would go a long way towards regulating it out of existence.
Here is the issue. Most insurance companies, except for leaders like MetLife, are looking for ways to cut their overhead and deny claims. New services like ridesharing give them another bite at the apple to retroactively rewrite contracts they have with the pubic. The only argument the insurance companies have is that it’s “too difficult” for them to legally deal with the Department of Insurance to get their policies changed. Instead, they’ve sponsored AB 2293, a blatant attempt and quick way to runaround the process and turn their back on customers.
AB 2293 tells car insurance companies that they don’t have to cover their paying customers even if they simply have a ridesharing app turned on. By defining the start of business activity as the opening of an app – and not the more obvious and appropriate time when a ride request is accepted – insurance companies can wipe their hands of massive amounts of drive time coverage that consumers have paid for.
Think about what a bonanza this is for insurance companies.
Say a consumer has a ridesharing app activated on their phone and stops to grab a cup of coffee in Starbucks. If their car is sideswiped in the parking lot while that latte is being prepared, Bonilla’s bill lets the insurance company walk away from their obligation of coverage.
Or, how about a consumer who is on their way to work and turns the app on to see if they can pick up a passenger going the same direction. If there is no ride request accepted, there is no commercial activity. Much like any other professional on call, this driver is merely available, but no money changes hands until they agree to pick up a passenger. To clear up any debate, the ridesharing companies carry 3x the state minimum coverage for this period if for any reason the personal coverage denies responsibility.
And here is the real kicker. Absolutely none of this has to do with safety. In every single case where a rider and driver are matched up, ridesharing companies will immediately provide $1 million in coverage.
The Bonilla bill is just misguided legislation that will make insurance companies lots of extra cash while delivering zero pubic benefit. Drivers who have dutifully paid their premiums for years should be angry. Californians that want to see ridesharing succeed in their state should get mobilized. Entrepreneurs who are building new products for a mobile world should be terrified.
