California opens fast lane to approve TNC insurance products
The California Department of Insurance has approved the state’s first private passenger auto policy endorsement specifically crafted to cover drivers for transportation network companies like Uber and Lyft. Coming just 77 days after the CDI signaled it was prepared to review such filings, the approval will allow Metromile, a partner of National General Assurance Co., to begin selling its new product in mid-February.
The Metromile policy is designed to extend coverage during the so-called “Period 1,” which had been a point of sustained debate between TNCs and insurers during the crafting of California’s TNC regulatory framework. Period 1 describes when a TNC driver has turned on their app and signaled they are available for hire, but has not yet made a connection with a fare.
The period is significant because TNCs are concerned that their commercial policies, if required to cover drivers as they simply cruise around, will become an easy target for fraud. Drivers could turn on their apps without any intent to connect with a fare and enjoy the benefits of the TNC’s commercial insurance. For their part, insurers are concerned that personal insurance policies, which are not designed to sustain commercial risks, require that there be a bright line between personal and TNC activity.
California was one of the first states to come to a legislative conclusion about how insurance responsibility should be apportioned between TNCs and personal insurers. Signed by Gov. Jerry Brown in September, Assembly Bill 2293 concluded that drivers must have liability insurance during Period 1 that offers at least $50,000 per individual and $100,000 per incident for bodily injury, as well as $30,000 for property damage. The bill left open whether Period 1 coverage would be procured by either the driver or the TNCs, which are required under the law to provide commercial coverage from the moment a fare is accepted until he or she is dropped off.
Metromile’s new product, an addition to existing personal auto policies, enables drivers to meet AB 2293’s requirement. By doing so, the TNC’s commercial policies are not made to sustain the Period 1 insurance burden. This is a crucial innovation for the continued development of TNC services, because it will ensure that neither TNCs nor personal insurers assume outsized risk. (Farmers and USAA have announced the roll-out of similar products in Colorado.)
The CDI’s approval of Metromile’s filing came quickly, certainly faster than I anticipated. For that, the CDI is (again) deserving of credit for its handling of TNC matters.
The alacrity with which the CDI was able to approve this filing may be in equal parts the result of Metromile’s straightforward rating plan, based on the number of miles an Uber driver travels during Period 1; the Legislature’s unambiguous call for fast action in the text of AB 2293; and/or the prioritization of TNC-related matters within the department (which is clear enough to see in Commissioner Jones’ push for a TNC white paper within the National Association of Insurance Commissioners).
Regardless of what inspired or enabled approval, Metromile’s filing is worthy of celebration. But for consumers to realize the benefits of a competitive market in this new arena, there will need to be more filings by more companies. Toward that end, with Metromile’s experience as a model, other insurers should heed the department’s call.
The fast lane appears to be open.
