Anyone driving in the US or UK needs some form of vehicle insurance. The only real exceptions are for residents of New Hampshire and Virginia, though other policies are in place.
Since the arrival of ride-sharing, new types of insurance policies have had to be created. Many providers now use specifically designed policies for Uber drivers for instance. And considering the number of them, this is perhaps not so surprising.
It is estimated that around 118 million people use Uber every month, and last year saw a near-return to pre-pandemic levels. In 2021, there were 6.3 billion trips by Uber drivers. With this level of usage, there are bound to be some accidents, and ride-sharing is viewed by some insurance providers as a higher risk.
Because of this, some insurance companies have developed usage-based cover that encourages safe driving by rewarding drivers’ behavior behind the wheel.
Do Uber drivers need a different type of insurance?
Some companies lump Uber drivers in with other types of private hire insurance holders. This means those who offer driving services that are booked in advance. Private limousine drivers, delivery drivers, and taxis. But, only those that are pre-booked.
However, some providers offer specific Uber insurance that is tailored to ride-and-share. These policies often use modern technology to help drivers understand how they drive and how to improve. Coverage can vary based on the type of service offered, ranging from standard UberX rides to more premium tiers like Uber Executive. In these cases, insurance may need to account for higher vehicle values, elevated customer service standards, and stricter operational requirements.
What is usage-based insurance?
Every driver would like to see their insurance premiums lowered, and usage-based policies offer the chance for the car owner to be in control. Uber drivers typically cover 1,000 miles a week if they are working full time and due to the nature of their job they need good insurance cover.
Usage-based insurance uses vehicle telematics data to score driving behavior. Telematics uses GPS and cellular technology to monitor the miles traveled, speed, braking and accelerating, and other driving metrics. It also monitors telephone usage while driving.
The driver will receive a score, often with suggestions for improving their driving. Then the data is used to help calculate the cost of insurance premiums. Poor driving will signify a higher risk and therefore higher premiums. Good driving is rewarded with discounted insurance premiums.
Who uses usage-based insurance?
With all the different insurance policies floating about it can get confusing as to what you may qualify for and what is suitable. After all, who insures racing drivers?
Usage-based insurance, or UBI, is available to Uber drivers often through specific policies but many other people could benefit from UBI too. Apart from many Uber drivers, other hire and reward drivers could find suitable telematics policies. And these days UBI is offered to regular car owners as well.
What are the pros and cons of usage-based insurance for Uber drivers?
Not everyone is a fan of usage-based insurance, but there are significant benefits to those who drive carefully. There are some downsides too.
Research has shown that since ride-share began, fatal car accidents have risen by up to 3%. This isn’t necessarily an indictment against Uber drivers, but with the number of journeys and miles covered, there is more of a risk of accidents occurring. The review system also puts pressure on Uber drivers to arrive at pick-ups in a timely fashion which could potentially encourage less careful driving.
Pros to UBI
The main advantage of getting more Uber drivers to use UBI is that a reduction in car accidents may be seen. Depending on the system in place, tips may be sent to the driver. These hints to become a better driver can for some be very helpful. And as already mentioned, cheaper insurance may become available.
- Lower insurance premiums
- Improved driving skills
- Reduction in car accidents
Cons to UBI
On the downside, some drivers don’t like the idea that Big Brother is watching. Therefore there are some privacy concerns. There is the risk of higher premiums, and there are some that question the accuracy of the data.
- Potentially higher premiums
- Privacy and security concerns
- Accuracy of data
Regardless of potential downsides, the market for usage-based insurance is growing, as is the number of vehicle owners signing up for it. In 2021, the UBI market was worth around $19.6 billion globally. By 2026, the industry is expected to have grown to $66.8 billion.
Summary
Clearly, many drivers are seeing the advantages of using usage-based insurance, specifically Uber drivers. With some insurance providers drawing up policies that are aimed toward these ride-share workers, Uber drivers have the chance to be rewarded for their careful driving.
Although there remains the possibility of being flagged as a dangerous driver, UBI still offers the opportunity for individuals to learn and improve. When this happens, insurance premiums will be reduced, and overall this should lead to safer roads and fewer accidents.
