Based on court filing, Uber and American Transit, the largest insurance company focused on the NYC for-hire transportation (TLC) market, might end legal dispute with settlement
Hello! Just a quick question when you mentioned Uber and Lyft would have to lower operating costs in NYC because they aren't covering liability insurance in the city, is there any laws regulations that stems from that? Other than that this was really helpful and a great read.
Thanks Christina! Uber and Lyft *have* lower operating costs in NYC from an insurance perspective (major cost item and balance sheet figure) because the driver (not Uber or Lyft) is paying for commercial insurance directly. Uber and Lyft might keep some balloon policy in the background, but their insurance expense in NYC is likely much less vs. other markets, and therefore their margins will likely be much better in NYC standalone.
NYC is a unique market that basically forced Uber and Lyft to abide by *existing* taxi and for-hire vehicle regulations, for its UberX / Lyft "regular" service offering (usually in other North American markets only the Uber Black / Lux service offering has commercial vehicle licensing requirements the driver is responsible for). So, this was actually the status quo that ended up benefiting Uber and Lyft.
However, there is now a driver minimum pay formula that hypothetically should be capturing driver insurance costs, but clearly it's not based on this year's 3.4% overall increase. Hope that helps clarify, but let us know if it doesn't!
Great Article as always. One question, if Cpi-w went up by 3% how much do u think a true cpi-tlc related expenses would have gone up by? Given the fact that car costs and insurance has gone up so much.
Thanks Lenny! That's a really good question and think during 2023, true inflation related to insurance and vehicle costs in NYC should be in the 15% to 20%+ range. This can also easily be quantified by the TLC via a survey or speaking to the insurance companies / brokers. A 3.5% increase is way below what real inflation was.
“In NYC, it appears Uber and Lyft have much lower operating costs because they are not directly paying for commercial liability insurance. In other words, NYC is not only a big revenue market, it’s likely an even bigger profit center for the rideshare companies."
I agree with this, if anything all the insurance they carry is some kind of excess policy to make sure RIDERS are protected just like they are outside of the five boroughs. Pretty lucrative market for them, New Yorkers spending capability is pretty impressive.
I am glad TLC might be looking into a more NYC TLC specific inflation index, because an insurer with a 60% market share, an allegedly $644 million deficit (a little more than what they can probably make in a year after broker commissions) and a settlement to pay definitely speaks a high increase on premiums due to their own fault or incompetence instead of the Nature of the business itself. Sounds kind of crazy and would understand if that was to happen that an increase should come the drivers way but everytime things outside of the industry control happen the consumers (Uber and Lyft riders) continue to pay an insane price for rides, it’s going to get to a point where it affects the demand of rides, New Yorkers do spends money in an impressive way like i said before but sometimes enough is enough.
Geico, State Farm, All State, Progressive etc,… in my opinion they are not getting into the NYC rideshare industry, these companies seem to have issues insuring vehicles (especially Toyota, Honda, Acura brands) in New York City due carjackings, vehicles being stolen, wheels being stolen, catalytic converters etc, and of course city officials do not seem to be interested in solving issues like this due to many reasons (anti-car agenda and law enforcement focusing on other things probably purposely). Progressive is not acepting new customers looking to insure some of these brands, All State is requiring that New customers have been at least 5 years with the same company before switching and Geico and State Farm prices are nonsense. Imagine all that plus the risk that already involve insuring a vehicle in the rideshare industry (nature of business).Just don’t see it happening, if it does happen at some point it would be AWESOME.
Congratulations on Automarketplace (+), based on the description I can forecast it will succeed, topics that nobody else talk about definitely.
"...it’s going to get to a point where it affects the demand of rides" - this is a really important point and thing to track and think we're edging closer and closer to a point where the price can only go so high and if it goes higher, trip demand will decline (which btw will hit UR too and cause more frequent lockouts if that metric isn't abandoned). Taking an Uber (or at least often) is kindof of becoming a sort of meme within Gen Z / 20-somethings for someone who spends freely or is living a luxurious life.
100%, insuring a "normal" vehicle is hard enough in NYC, let alone a high usage, commercial vehicle, so the big insurance names will likely not step into the TLC market anytime soon.
Hello! Just a quick question when you mentioned Uber and Lyft would have to lower operating costs in NYC because they aren't covering liability insurance in the city, is there any laws regulations that stems from that? Other than that this was really helpful and a great read.
Thanks Christina! Uber and Lyft *have* lower operating costs in NYC from an insurance perspective (major cost item and balance sheet figure) because the driver (not Uber or Lyft) is paying for commercial insurance directly. Uber and Lyft might keep some balloon policy in the background, but their insurance expense in NYC is likely much less vs. other markets, and therefore their margins will likely be much better in NYC standalone.
NYC is a unique market that basically forced Uber and Lyft to abide by *existing* taxi and for-hire vehicle regulations, for its UberX / Lyft "regular" service offering (usually in other North American markets only the Uber Black / Lux service offering has commercial vehicle licensing requirements the driver is responsible for). So, this was actually the status quo that ended up benefiting Uber and Lyft.
However, there is now a driver minimum pay formula that hypothetically should be capturing driver insurance costs, but clearly it's not based on this year's 3.4% overall increase. Hope that helps clarify, but let us know if it doesn't!
Thank you for the insight really appreciate it.
Great Article as always. One question, if Cpi-w went up by 3% how much do u think a true cpi-tlc related expenses would have gone up by? Given the fact that car costs and insurance has gone up so much.
Thanks Lenny! That's a really good question and think during 2023, true inflation related to insurance and vehicle costs in NYC should be in the 15% to 20%+ range. This can also easily be quantified by the TLC via a survey or speaking to the insurance companies / brokers. A 3.5% increase is way below what real inflation was.
Not sure if u are aware, the tlc sent out emails asking for expenses
Did read that and went through the survey, but didn't see a question on insurance?
Can’t remember
“In NYC, it appears Uber and Lyft have much lower operating costs because they are not directly paying for commercial liability insurance. In other words, NYC is not only a big revenue market, it’s likely an even bigger profit center for the rideshare companies."
I agree with this, if anything all the insurance they carry is some kind of excess policy to make sure RIDERS are protected just like they are outside of the five boroughs. Pretty lucrative market for them, New Yorkers spending capability is pretty impressive.
I am glad TLC might be looking into a more NYC TLC specific inflation index, because an insurer with a 60% market share, an allegedly $644 million deficit (a little more than what they can probably make in a year after broker commissions) and a settlement to pay definitely speaks a high increase on premiums due to their own fault or incompetence instead of the Nature of the business itself. Sounds kind of crazy and would understand if that was to happen that an increase should come the drivers way but everytime things outside of the industry control happen the consumers (Uber and Lyft riders) continue to pay an insane price for rides, it’s going to get to a point where it affects the demand of rides, New Yorkers do spends money in an impressive way like i said before but sometimes enough is enough.
Geico, State Farm, All State, Progressive etc,… in my opinion they are not getting into the NYC rideshare industry, these companies seem to have issues insuring vehicles (especially Toyota, Honda, Acura brands) in New York City due carjackings, vehicles being stolen, wheels being stolen, catalytic converters etc, and of course city officials do not seem to be interested in solving issues like this due to many reasons (anti-car agenda and law enforcement focusing on other things probably purposely). Progressive is not acepting new customers looking to insure some of these brands, All State is requiring that New customers have been at least 5 years with the same company before switching and Geico and State Farm prices are nonsense. Imagine all that plus the risk that already involve insuring a vehicle in the rideshare industry (nature of business).Just don’t see it happening, if it does happen at some point it would be AWESOME.
Congratulations on Automarketplace (+), based on the description I can forecast it will succeed, topics that nobody else talk about definitely.
Thank you 🙏 and great commentary!
"...it’s going to get to a point where it affects the demand of rides" - this is a really important point and thing to track and think we're edging closer and closer to a point where the price can only go so high and if it goes higher, trip demand will decline (which btw will hit UR too and cause more frequent lockouts if that metric isn't abandoned). Taking an Uber (or at least often) is kindof of becoming a sort of meme within Gen Z / 20-somethings for someone who spends freely or is living a luxurious life.
100%, insuring a "normal" vehicle is hard enough in NYC, let alone a high usage, commercial vehicle, so the big insurance names will likely not step into the TLC market anytime soon.
A lot going on right now, can’t make a right decision without affecting other interests.