“Ridesharing” A Shift in the Traditional Business Model

With the changing environment of “ridesharing” and new companies like Uber and Lyft gaining extreme momentum, it is important to understand how the insurance industry can aid in providing measures that keep drivers and users of these services safe.

Thom Smith, President of Sullivan Brokers weighs in on the offering of a rideshare endorsement on the Farmers automobile policy in California. This endorsement is the first of its kind to be offered in California. As a new product, Smith says this ridesharing endorsement on the Farmers automobile policy is important for several reasons.

Smith points out that “when a commercial enterprise, such as Lyft, Uber, and Sidecar, introduces a product or service that represents a significant change to a traditional business model, the insurance industry has not always been able or willing to design & offer protection for the new exposures these companies face.  In this case, Transportation Network Companies (TNC) created new exposures for themselves, and for the individual drivers.  The development of TNCs represents a rapid paradigm shift that created exposure without a solution.”

Farmers was able to see a need for this coverage as well as an opportunity.  For the drivers of these services, the exposures to loss was traditionally excluded by a personal auto policy.  Farmers’ offer gives coverage that resolves the question as to whether the TNC driver has coverage when they are not covered under the TNC policy.  Smith states that “Farmers probably also realized, that without offering a solution, many of their policyholders were already engaged in TNC driving without being protected.”

This shift in the traditional business model provided opportunity for the insurance industry to use innovation and expertise to create a product that acknowledges the new and different modes of transportation available to consumers.


Thom Smith1Thom Smith, CPCU, CLU is President of Sullivan Brokers.  His diverse insurance background helps to differentiate SBWIS.  Among his previous roles are insurance company President, chief claims officer, and retail agent. In more than 35 years in the industry, he has expertise in virtually every line of coverage while working for Farmers, American Re (Munich Re), and Great American Custom.