Managing Ride-sharing Risk With Telematics

Telematics Making Ride-sharing Safer Than Driving One’s Own Vehicle

Since the emergence of ridesharing programs like Uber where global net revenues are over $11 billion, insurance rules have become a personal challenge to policyholders in the new gig economy. Traditional insurance companies lacked insight into actual driving behavior and argued that drivers participating in ride-sharing services are less scrutinized and thus less safe behind the wheel.

At first, the auto industry was also concerned about the impact of ride-sharing but carmakers surprisingly have witnessed record new car sales while others have argued that it’s safer to drive yourself than call Uber, Lyft or a cab. But is that conclusion accurate? Is it safer to drive yourself than call a ride-sharing service? Are the risks higher to insure drivers who participate in ride-sharing programs?

Emerging evidence suggests otherwise. A new study from Massachusetts-based research firm Aite Group suggests that it may actually be safer to use a ride-sharing service like Uber or Lyft than driving yourself.

Why? Because, contrary to popular opinion, most ride-sharing services are actually closely regulated through automotive telematics technology. This tech allows ride-sharing companies to keep close tabs on their drivers, giving them a picture of how safely they navigate city streets. In the end, this means the dangerous drivers can be identified and terminated, Aite Group found.

This is good news for Uber, which has faced mounting criticism over its refusal to use fingerprinting technology to check out the backgrounds of its drivers before employing them (in comparison, many taxi services carry out these checks).

In response, Uber has stepped up its effort to show that riding with its drivers is a safe bet. For one, the company says it now insists its drivers have at least one year of licensed driving under their belt before applying to work with them. At the same time, Uber now accepts only those drivers who have had three or fewer traffic incidents over the previous three years and liability coverage up to $1 million, with any driver caught driving under the influence immediately dismissed from qualification. Prospective drivers are also dismissed if they’ve received a serious speeding ticket (meaning they were caught driving 20 or more miles per hour over the speed limit) or if they’ve been nailed with a reckless driving charge.

Now, there’s, even more, evidence to suggest that riding with Uber and other ride-sharing services is safe. In its report, which is titled “Driving Analytics: Ridesharing Drivers Are Safer Than Average American Drivers,” Aite Group broke down driving statistics into several key categories, including speeding and cell phone usage. In these cases, the ride-sharing drivers performed better than average American daily drivers: they tended to keep to the speed limit and they spent less time on their phones (even though Uber drivers depend on cell phone communication to do their jobs).

Specifically, the Aite Group report found that Uber drivers spend about 30 percent of their trips — compare that to the average American driver who sped for about 41 percent of their adventures out on the road. When it came to cell phone usage, Uber drivers used their phones for just 23 seconds during a 15-minute trip, while the typical driver used their phone for about 35 seconds.


At the end of the day, Aite Group says it’s time for the public, authorities, and insurance companies to recognize that using ride-sharing services is anything but a hazard. “Insurers with negative bias toward ridesharing may actually reconsider and favor policyholders that engage in ridesharing to the extent that participating in such activity may contribute to making them better drivers,” says Aite Group’s research director, Gwenn Bezard. “For instance, insurers could incent young drivers to engage in ridesharing as a way to accelerate their growing up into savvy drivers.”

Part of the reason insurers has been hesitating to support ride-sharing services in the absence of data showing how safe they are to use. But that’s now changing thanks to the rapid development of automotive telematics, which helps both insurers and ride-sharing service providers see how drivers are doing out on the road.

The possibilities for automotive telematics are almost endless. By installing high-tech (but increasingly common and affordable) items like sensors and cameras in ride-sharing vehicles, insurers can track how fast a ride-sharing service driver is going, how rapidly they’re braking, how fast they’re taking corners, what time they’re driving, and where they’re driving. The upside: it becomes increasingly easy to identify and reward safe drivers and punish or terminate drivers who put their passengers’ lives in danger.

As more and more ride-sharing services employ automotive telematics technology, it’s expected their popularity will grow — and that could put an even more desperate squeeze on traditional taxi services. As of the beginning of this year, nearly half a million people in the United States said they had used ridesharing programs like Uber or Lyft.

This is not the first time a study has shown automotive telematics to have a significant impact on the way people drive. Last year, a survey from the Insurance Research Council (or IRC) showed that most people who installed telematics devices in their vehicles said they were more careful behind the wheel than they were before putting those devices in their cars. In fact, almost one in five of the drivers surveyed said they had made “significant changes” to the way they drove since starting to use automotive telematics technology.

Elizabeth Sprinkel, a senior executive at the IRC, says the study is evidence that automotive telematics can make driving safer. “These findings suggest that having telematics devices installed in vehicles can play a beneficial role in promoting safe driving and reducing the frequency of auto accidents and their associated costs,” said Sprinkel. “We can confidently say that the introduction and use of telematics technology is a move in the right direction.”

That’s why it’s expected that the ride-sharing services which adopt automotive telematics technology will have more success in their ongoing war with traditional taxi companies. To date, the major knock against ride-sharing programs was that they weren’t regulated enough, meaning many people feared that too many random (and potentially dangerous) drivers were being employed by companies like Uber.

The Toronto Star, which is based in a city where the ride-sharing vs. taxi war has become a veritable no-holds-barred fight, recently emphasized that point in an editorial. “Safety is key,” the paper noted. “Defenders of conventional cabs have repeatedly portrayed ride-sharing companies as putting the public at increased risk. And they claim that easing regulations on taxis would make them more dangerous too.”

Telematics can help provide that regulation and ensure that drivers are being safe. The Star recognized the importance of this move in its editorial. “Uber employs a telematics system that monitors drivers who have dashboard-mounted smartphones,” The Star noted. “The technology allows the company to micro-examine details, such as a driver’s acceleration and braking pattern, and pass on advice for safer driving.”