Rise of Uber forcing Canadian insurance companies to adapt

As municipalities continue to debate the legality of Uber's ride-hailing service, UberX, its enormous popularity is prompting Canadian insurance companies to introduce coverage for drivers carrying paying passengers in their personal vehicles.

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"Insurance needs to keep up," Adam Mitchell, president of Mitchell & Whale Insurance Brokers Ltd. in Whitby, Ont., told CBC News. "It's one of the stodgiest old industries,that hasn't innovated and hasn't been totally disrupted yet."

But that disruption now appears to have arrived, Mitchell says, pointing tothegrowing "sharing economy" that is, among other things, affecting the way people use cars and taxis.

"This is not your grandfather's taxi," he said of services likeUber and Lyft.

In October 2014,the Insurance Bureau of Canada issued a warning thatdrivers without commercial coverage who use their cars to carry paying passengers were in violation of their personal insurance policies and could be denied compensation in the event of an accident.

But the commercial coverage required for taxi drivers is prohibitively expensive for people trying to earn a few extra bucks driving their personal vehicles for Uber, Mitchell said.

Last September, Intact Financial and Uber announced they were working together to develop an insurance plan "designed exclusively for the ride-sharing industry in Canada."

Earlier this week,Intact Financialspokeswoman Stephanie Sorensonconfirmed in an emailto CBC News that the company had been "working proactively with insurance regulators in Ontario, Alberta and Quebec since August to develop simple and affordable products that fit the needs of Canadians.

"We are optimistic that products will be approved in these jurisdictions soon," she added.

New entrant

At this point, however,another provider has already beat Intact, at least to the Ontariomarket. On February 1,AvivaCanada became the first company inthe countryto offer "personal coverage for ride-sharing drivers."

Aviva spokesman Glenn Cooper said there are16,000 ride-sharing drivers in the Greater Toronto Area alone.

"That was 16,000 drivers out there going around without the proper coverage, which essentially means without coverage," Cooper said.

To be eligible, drivers must have an existing personal policy with Aviva, Coopersaid. The companyuses information like driving record, vehicle type and claims history in the area to calculate the cost of a "simple extension of that policy" to cover them while carrying customers.

CBC News obtained a copy of a document containing Aviva's pricing information and calculatedit would cost between $33 and $230 permonth for drivers to add that extra coverage to their policies, depending on factors like their driving record,what city they are driving in, and whether they have customersup to 10 hours a week or up to 20 hours a week.

Avivadoes not cover ride-sharing formore than 20 hours a week, Cooper noted.

"A good majority of people doing ride-sharing were doing so on a part-time basis to supplement their income. And that was the market that we were interested in getting into," he said, adding the product is not meant for people who want to drive commercially full time.

That appears todifferfrom the insurance program proposed byIntact Financial and Uber, which would cover allUberdrivers, according to a statement from Sorenson.

"Intact's proposed product includes both a commercial and personal lines component. It will provide Canadians who participate in ride-sharing with coverage that is simple to use, affordable and comprehensive," she said. "The proposed commercial policy, which will be purchased by Uber, will cover all Uber drivers under one policy."

"We are also proposing to make adjustments to Intact Insurance and belairdirect [a subsidiary ofIntact Financial]personal auto policies to allow ride-sharing."

Uber has liability coverage

Uberhas repeatedly responded to accusations often from municipalities andthe taxi industry that itscustomers are at risk becauseits drivers aren't insured properly by saying every ride is "covered by auto liability insurance with Uber's current insurance provider."

According to a sworn statement by an UberCanadamanager inMay 2015 inan Ontario Superior Court of Justice, Uber has liability insurance forup to $5 million to cover "third-party bodily injury and property damage" withAIG Insurance Company of Canada.

That policy is set to expire on May 8, 2016, according to the statement.

As an insurance broker, Adam Mitchellis happy that insurance companies are accommodating the growth ofride-hailing services, and heoffers Aviva'spolicythrough his own brokerage in Whitby. But he is alsoconcerned Uber has not been transparent enough in the past about what's actually covered especially when it comes to collision damage to drivers' cars.

"Every Uber driver you drive with thinks they're insured because they've been told 'every ride is insured,'" Mitchellsaid. "So they might not know the physical damage if they crash their car is not covered."

The fact that Uberis now working to develop ride-sharing insurance in Canada reinforces the murkiness of the issue, he said.

"Wait a second, Uber. You just told me every ride was insured, but now you partnered with Intact to come up with a solution? A solution to what? You've told me there's no problem," Mitchell said.

When asked about the new policy,Uberspokeswoman Susie Heath said in an email that it was"an innovativeinsurance plan specifically tailored for ride-sharing in Canada" and that it was looking forward to "continuing our work with Intact Financial and regulators across the country to bring this new plan to market."

Uber did not respond to a follow-up emailrequest for more specifics about whether the company would bepaying forboth collision and liability insurancefor its drivers under the new plan, or if it would be selling coverage to them.