Normally, one would think the subject in the title was a delivery vehicle, but it this case it is the entirety of the idea. It is not just a ride in a black SUV from a part-time driver participating in a new industry, and delivering a person to a specific location. No rather, it is the fact; both the House and Senate have drafted legislation seeking to regulate this pioneering industry. They are following Minneapolis in their attempt to define the parameters of an emerging industry and the principal target is Uber.
If you are unfamiliar with what we are talking about, Uber is a service where instead of calling a cab, you have an app on your phone and you call a service which comes to pick you up. You have a credit card on record and the fees are collected directly without the passenger having you fish for their card. Uber as well as Lyft are ride sharing commercial ventures. The problem is in places like Minneapolis, which derives a significant revenue stream from traditional commercial modal transportation, taxis and limos, Uber, Lyft and others do not have the same levels of conformity, nor service. Many argue the non-traditional service is far better, but it has its own share of problems.
The main questions surround insurance liability coverage and this means who pays what and when. When a person is using their own vehicle for commercial purposes, the haters want more requirements, protections and assurances through insurance.
Since Uber is not a universal service in every market they are strategically tackling these regulatory issues in different communities and various state legislatures are also weighing in. In Minneapolis, newly elected Council member Jacob Frey (DFL) go ahead of the issue and hammered out an ordinance which lays our the Mill City response to this new transport system and traditional groups have watched their competitors have to meet lower coverage standards. Prior to Frey’s action Uber was banned from picking up riders in Minneapolis and only allowed to drop them off.
In the attempt to create a level playing field the strict compliance issues are questioned at many turns and show the complexity of the issue. Insurance companies are providing riders to insurance policies and in large part, but the “public protections” are where the officeholders weigh in.
A regular insurance policy is not enough coverage for a commercial venture. This is not your average soccer mom taking a group of kids to practice or is it?
Yesterday, we learned in the House Commerce Committee that Uber is a big deal, in fact it was the first issue on the agenda. They are defending against attempts to encroach on their business practices and surprisingly enough, Republicans are heaping on the language to regulate this industry and the DFL seems to be the group trying to save this entrepreneurial effort.
It’s strange how things evolve.
Now the two sides are discussing what the minimum insurance requirements are. Will it be a million dollar blanket policy or $100,000 per person covered? Uber seeks a homogenized approach, which is consistent with what they are facing in other states and wants Minnesota not to be an outlier. The crux is will the state follow Minneapolis’ lead or head of in its own direction.
There might be a simple answer, which Uber should take from other Minnesota companies. The example being General Mills, which self insures through an off shore company located in the Bahamas named Gold Medal Insurance. By setting up their own insurance company General Mills makes money on the transaction and the dividends paid back to the principal are taxed a a far lower rate.
If Uber set up their own insurance entity in the Bahamas they could insure the company and provide policies to their drivers and the entire operation will be profitable to all parties. The policies would meet the regulatory requirements and Uber drivers would then incorporate their premiums into the cost of doing business.
We will see what the ultimate resolution is. In the House Rep. Chris Swedzinski (R-16A-Ghent) is carrying HF1783 and in the Senate Sen. Kari Dziedzic (DFL-60, Minneapolis) has authored SF1679. Again, Swedzinski is carrying legislation with stronger ties to the insurance industry and Dziedzic has legislation more inline with the Minneapolis City Council ordinance.