Homeowner insurers receive record-high claimant satisfaction rating

Satisfaction among homeowner-insurance policy holders is improving, despite a difficult 2016.

Every year, the J.D. Power U.S. Property Claims Satisfaction Study scores property insurers according to collective claimant satisfaction. For 2016 that score was higher than it ever has been: 859 out of 1,000. This is a marked improvement over 2015's score of 846, which had been the first decrease in five years. 

Most importantly, it's a sign that the industry is becoming increasingly conscious of consumer satisfaction. 

The scoring criteria
J.D. Power ranks insurers by five key metrics:

  1. Settlement: Amount of money offered by the insurer. 
  2. First notice of loss: Initial reporting of a claim or incident.
  3. Estimation process: Assessment of claim or damage to estimate its value. 
  4. Service interaction: Interaction with insurer and customer service agents.
  5. Repair process: Fixing damage following a settlement.

Of these areas, settlement factor was the main driver of the improvements, followed by estimation process and service interaction. This is somewhat surprising (and for that matter impressive) considering incurred losses and loss-adjustment costs increased by 7.6 percent between 2015 to 2016. Additionally, the number of catastrophe-related claims rose – notable climate occurrences such as Tennessee's forest fires, Hurricane Matthew and 1,000-year flooding events in Louisiana certainly had a hand to play here.

Problem areas remain

"Customers want processes that are less time-consuming and more intuitive."

Despite notable improvements, claimants still have several key pain points. Water damage and other claims that are difficult to settle quickly fell by as many as 39 points. According to Property Casualty 360, these lower scores make sense. One of the key findings of the report was that the speed at which claims are resolved is of the utmost importance to customers. 

The other notable concern, according to a separate J.D. Power report, is the dissatisfaction of generation Y (customers aged 21 to 38). As the homeowners of the future, this is somewhat troubling for the industry as a whole. New on-demand insurance startups have potential for better or worse. 

But even this component has a silver lining. In the past few years, property insurers as a whole have rapidly adopted new forms of technology to improve processes. This includes Big Data strategies like the use of telemetry to create use-based auto-insurance policies. Meanwhile, some homeowners can receive rate discounts if they use smart home technology. Then there's the rise of mobile applications:

"Insurance companies are starting to offer mobile applications that can help in offering quotes, reporting claims, accessing information and even allowing customers to summon agents to their home," Property Casualty 360's Joseph Jaafari wrote. 

It all boils down to the fact that customers want processes that are less time-consuming and more intuitive. Technology is not an in by itself, but rather a means to get to better customer satisfaction. 

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The relationship between cyber security regulation and cyber insurance

Regulation almost always has the side effect of increasing risk to an organization's interests.


As of March 1, financial institutions in New York State became obligated to comply with the nation’s first cyber security regulation. In broad strokes, the New York Department of Financial Services now requires that financial institutions structure a formal cyber security policy based on periodic risk assessments.

The immediate priority for financial institutions in New York is to create a risk management framework to sustain ongoing compliance with the new regulation. Also important, according to Law360 contributor Jeff Sistrunk, is having a backup plan in the event that a financial institution experiences a data breach. This is because the regulation gives litigators more leverage as a result of the added liability of the data security rule, or failure to comply entirely with it.

That backup plan, according to Sistrunk, is cyber security insurance.

A burgeoning market

“Investment in cyber insurance is expected to increase in 2017.”

Cyber liability insurance has been a hot-button issue in the past few months. As the fallout from cyberattacks increases – the Yahoo intrusion alone cost $350 million – so does the incentive to invest in cyber insurance. According to PricewaterhouseCoopers, the value of annual gross written premium will cap out at $7.5 billion by 2020.

That said, the market is still relatively young and must undergo a certain amount of maturation. At the moment, there is a significant lack of readily available data pertaining to the actual financial damage caused by cyberattacks, which makes it difficult to assess actual risk exposure. For example, we know that ransomware raked in a whopping $1 billion in 2016. While that information is helpful, there may not be enough of it just yet.

But even with those caveats, investment in cyber insurance is expected to increase in 2017, if for no other reason than that cyberattacks are continuing to become increasingly sophisticated. Meanwhile, digitization and even automation are becoming more central to business operations in a variety of industries. And as this happens, the potential for loss spikes – not just in terms of reputational damage and IT downtime, but also in the form of class-action lawsuits.

More regulation: Does it help or hurt? 

“Cyber security regulation is a form of ammunition that could someday guide liability.”

Sistrunk’s argument seems to be that greater cyber security regulation gives litigators something to really sink their hooks into as they bring data breach-related cases to court. In this sense, the regulation does ultimately create an added layer of risk for financial institutions.

The opposite is also true. Showing that an organization has complied with specific cyber security standards laid out by a state-sponsored regulatory body could undercut plaintiffs’ claims. At a minimum, this may serve to limit some of the damages imposed by the court.

Either way, the only certainly seems to be that cyber security regulation is a form of ammunition that could eventually guide liability. It’s also worth noting that New York’s pioneering cyber security regulation could influence regulators in other states to follow suit, which is certainly a development worth following.

At the end of the day, though, cyber risk continues to be a very real threat to financial institutions, regardless of what form that risk takes. As long as this is the case, cyber insurance will continue to have a place in America’s financial institutions.


17 million U.S. homeowners face high environmental hazard risk

Environmental contamination is a very real problem for many homeowners.

A new study conducted by ATTOM Data Solution, curator of the largest property database in the world, has revealed that 17 million U.S. homes, with a combined worth of nearly $5 trillion are situated in environmental hazard zones. 

The researchers analyzed 68.1 million single-family homes and condos spread across 8,642 zip codes. About 25 percent (17.3 million) of these residencies were deemed at high risk of one or more of the following environmental hazards:

  1. Poor air quality: High concentrations of airborne pollutants. 
  2. Superfund sites: A site deemed by the EPA as containing hazardous waster. 
  3. Polluters: Based on the number of facilities included on the EPA's Toxic Release Inventory list. 
  4. Brownfields: Land that may be contaminated by the presence of a former pollutant. 

Areas of greatest risk
The study identified risk ratings by zip code with 455 being the highest and -8 being the lowest, and then ranked those zip codes by risk. The top five areas include:

  1. Denver (80216): 455
  2. San Bernardino, California (92408): 400 
  3. Curtis Bay, Baltimore, Maryland (21226): 380
  4. Santa Fe Springs, California (90670): 356 
  5. Fresno, California (93725): 339

Ever-changing risk landscapes

"Does your plan protect you from these new risks?"

Geographic risk has proven time again to be anything but static. Shifting climate patterns, industry booms and and population influxes are just some of examples of conditions that can influence risk ratings in specific areas. In turn, this raises questions about property casual coverage – specifically, does your plan protect you from these new risks? 

Case in point, the Federal Emergency Management Agency is currently in the process of redrawing flood zones, resulting in many homes and businesses being reclassified as flood-risk properties. This has left many property owners in the position of having to purchase flood insurance, or in some cases, having to explain why they have been erroneously placed in a food zone. What's more, even as FEMA reclassifies flood zones, risk continues to change. 

Similarly, homes and businesses that may be at risk of environmental hazards including unusual weather events (i.e. California's recent super storms), vapor intrusion (when contaminated soil releases chemical in vapor form that mix with indoor air) and microbial contamination (discharge of pollutants into water). All of these, according to Property Casualty 360, can increase the cost of claims.

For homeowners living in areas with high environmental hazard risk, it may be worth meeting with your insurer to make sure you're covered. 


Distracted driving continues to inflate auto-insurance rates

Driving and texting; Don't do it.

Since 2011, nationwide auto-insurance premiums have increased by 16 percent. Today, the average annual rate for one driver is $926.

According to Bloomberg, the country's largest auto insurers have paid out $1.05 in costs for every $1 worth of premiums. This is in contrast to about a decade ago, when insurers pulled in $1 for every 95¢ they spent on claims. In other words, they used to profit 5¢ on the dollar.

In response to the reversal of this trend, the pace of auto-insurance rate hikes has hit a 13-year high. Obviously, consumers and some regulatory bodies aren't too pleased. Nevertheless, it appears that the rate increases are in direct response to increasing payouts.

And as for what's bringing up the claims, experts have their eyes on distracted drivers.

Texting and driving: A recipe for disaster – and higher premiums

"A sizable percentage of drivers are texting and driving."

It turns out that of all the distractions on the road, none is quite as disruptive as texting and driving. One of the nation's largest auto insurers noted that 36 percent of its claims stem from incidents involving texting, according to NBC.

Furthermore, a driver doesn't necessarily have to submit a claim involving texting for rates to increase under that particular plan. Receiving a citation for texting and driving is reason enough to justify a premium hike, even if there was no collision or apparent impedance on the driver's performance. Think of tickets as the probable cause in the auto insurance world.

Unfortunately, it's not just the people texting and driving who suffer. In the long run, any person on the road, regardless of their driving record, is more likely to make a claim. With a sizable percentage of drivers texting and driving, the hazard will pervade the entirety of that driver's surroundings.

Case in point, auto insurers are technically losing money right now.

It may get worse before it gets better

"Digital innovation in automobiles could ultimately put lives at risk."

Because texting appears to be one of the more significant drivers of rate increases, in theory at least, voice dictation for texting could help save lives by keeping eyes on the road.

However, not everyone is convinced that smarter vehicles are a good idea. One study found that interacting with voice recognition and AI such as Amazon's Alexa or Apple's Siri in vehicles is actually more dangerous than talking on the phone. What's more, automakers haven't stopped at hands-free texting. Ford and Hyundai, for instance, are currently helping people manage their calendars and shop online using their voice.

The concern here is that the distracted driving will get worse. In addition to increasing the likelihood of claims and raising the average costs of auto insurance, digital innovation in automobiles could ultimately put more lives at risk. 

For now, the best thing that drivers can do is avoid using any type of voice dictation technology while their vehicle is in motion – maybe waiting instead until a traffic light.  As for any handling of a smartphone behind the wheel, the best rule of thumb is this: If you can't do something without taking eyes off the road or hands on the wheel, then don't do it. 

2016-2017: Loss and opportunity in the property/casualty insurance market

Property casualty insurers and their customers can look forward to a strong 2017.

The numbers are in, and it looks like the insured came out ahead of the insurers for property casualty insurance in 2016. According to a report by A.M Best, property casualty insurance took its first loss in three years, at a net estimated total of  $1.7 billion.

Darkest before the dawn

"The bad news for all parties involved is the current volatility of risk."

While the report chocks the loss up to several factors, including heightened competition pushing down rates, the most substantial problem is increased risk exposure – specifically, due to catastrophic events and certain weather conditions. 

"Direct insured property losses from catastrophes striking the United States totaled $17.4 billion in nine-months 2016, up from $13.1 billion a year earlier and above the $15.9 billion average nine-months direct catastrophe losses for the past ten years," read an ISO press release.

Based on recent events, it's doubtful the last few months would provide any measure of reprieve for insurers. In November an 18,000-acre wildfire befell Sevier County, Tennessee. This catastrophe single-handedly resulted in "$1 billion in combined residential and commercial property losses." 

Commercial auto also took a loss, but for very different reasons, namely, "distracted driving, increased miles driven and vehicles on the road due to lower gasoline prices, higher repair costs, and increased severity of liability claims."

The bad news for all parties involved is the volatility of risk at the moment, particularly where weather-induced loss is concerned.

The silver lining

"The good news is that the space currently has a strong capital base."

The good news for insurers, and to an extent the insured, however, is that the space currently has a strong capital base at $165 billion in excess capital, which according to a report by Barclays research is approximately 25 percent over-capitalization. 

What's more, A.M Best predicted that the net total of written premiums will see increases of 2.7 percent in 2016 and 2.5 percent in 2017. This is less than 2013, 2014 and 2015 which respectively saw net increases of 4.4 percent, 4.3 percent and 3.3 percent. But these gains are expected to contribute to an already existing surplus all the same.

Furthermore, they will likely be offset, at least to some degree, by new opportunities in commercial transportation insurance, which will like see an increase in underwriting of about 3.5 percent. In large part, this will be the result of technological innovations, including autonomous functions in vehicles, which could help commercial drivers reduce fatigue and curb the number the overall number of accidents. 

"From a commercial aviation perspective, pilots take care of takeoffs and landings, and everything else is automated," Jay Gelb, managing director at Barclays, said at a recent panel discussion in New York. "It feels like modes of transportation on the ground need to catch up to that."

And catching up they are. In the fall of 2016, the first delivery by autonomous semi-truck was safely completed. Innovation in commercial transportation is likely to continue this year, which could have a profound impact on drivers' safety, and subsequently, auto insurance as a whole. 


Indiana may be the next state to mandate coverage for fertility treatments

IVF coverage is not required in most states.

Indiana state representative Robin Shackleford (D) recently drafted House Bill 1059, a proposal that would mandate the offer of coverage for women seeking infertility treatments.

In order to qualify for in vitro fertilization coverage under the proposal, women must have exhausted all other options. The proposal notes that eligible patients must prove unable to "attain a successful pregnancy through a less costly infertility treatment for which coverage is available under the accident and sickness insurance policy." Other qualifying patients are those who have a history of infertility dating as far back as five years, or one of four preexisting medical conditions that inhibit pregnancy. 

In its current form, language in the bill stipulating that the procedure can only be covered when executed "with the sperm of the patient's spouse." This indicates that coverage does not apply if donor sperm is used, which isn't unusual.

If passed in its current form, the bill would become effective July 1, 2017.  

Averages cost for infertility treatments 

"The total combined cost can easily exceed $50,000."

According to the National Conference of State Legislators, about 12 percent of women seek out infertility treatments. The "less costly" infertility treatments referenced in Shackleford's bill most commonly consist of artificial insemination – which on average costs anywhere between $300 and $1000 – or hormone therapy – which will typically run patients $2,500 to $3,500 per month.   

Women who are unable to conceive through other methods may be recommended for IVF, which costs, on average, $12,000 per treatment, according to Forbes contributor Jennifer Gerson Uffalussy. She added that additional medications will tack on another $3,000 to $5,000.

The total combined cost for IVF paired with other infertility treatments can easily exceed $50,000.

States that currently mandate coverage
As of this writing, 15 states have laws in place regarding the coverage of infertility treatments

  • Arkansas
  • California
  • Connecticut
  • Hawaii
  • Illinois
  • Louisiana
  • Maryland
  • Massachusetts
  • Montana
  • New Jersey
  • New York
  • Ohio
  • Rhode Island
  • Texas
  • West Virginia 

It's worth nothing that California insurers cannot cover IVF. In Louisiana and New York, insurers are forbidden to exclude medical treatment for patients "solely because the medical condition results in infertility," but they are not required to offer coverage for infertility treatments. 

Other exclusions may vary according to state law, for instance, treatments that use donor eggs or sperm.

If passed, House Bill 1049 would make Indiana only the 16th state to have an active law regarding infertility insurance coverage. 

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Finding business stability in a time of economic uncertainty

In times of economic stability, trade credit between organizations is a saving grace. Buyers such as retailers and manufacturers can purchase raw materials on credit, and execute their business initiatives the moment an opportunity presents itself. On the other side of the table, suppliers can lock down a customer's business and ultimately generate their revenue in the form of accounts receivable.

But in times of economic and political uncertainty, like the one we're living in, trade credit becomes a significant risk for both parties involved. If a buyer becomes insolvent and cannot repay a debt, the supplier will have to eat those losses. At the same time, entire enterprises are constructed on the value they derive from trade credit. Jack Cowley, partner at Trade Risk Group, put it best:

"Trade and trade credit is literally the lifeblood of business in the United States."

If domestic and global suppliers pulled out of the trade credit game, they'd be pulling the rug out from the under their own feet, and for that matter, the global economy's. In other words, risk avoidance simply isn't an option.

Suppliers need to keep playing the game, and they need to play it well. The best way to do that is to manage their trade risk.

Trading on a tightrope
"The market place hasn't had a lot of experience with bad debt in the recent past," Gene Ferraiolo, TRG partner, said in a recent interview. "But there's a tremendous amount of uncertainly about what will happen in the future."

Specifically, Ferraiolo referred to the political and economic changes that are leaving the future of global markets up in the air. Businesses in the U.S., for instance, are figuring out where they stand in the wake of Donald Trump's darkhorse victory. Across the pond, Brexit has upended countless companies' supply chains, and will continue to be a source of uncertainly as trade agreements are renegotiated between the remaining EU members. To cap it all off, economists predict a slowdown in global economic growth within the next 50 years.

"The most resilient buffer against trade risk is trade credit insurance."

In total, these circumstances increase the likelihood of insolvency, according to Ferraiolo. Beyond that, Cowley added that these conditions may encourage businesses to act more conservatively out of wariness, thereby causing many of them to miss critical opportunities for profit and growth.

On a positive note, there are ways to manage this risk. Ferraiolo and Cowley agreed that the most resilient buffer against trade risk is trade credit insurance.

Creating credible credit
Ferraiolo and Cowley contend that by insuring accounts receivable, suppliers have more liberty within their own market, for several key reasons.

  1. Risk mitigation: In the event that a customer becomes insolvent, suppliers won't have to self-insure their loss. This is the primary benefit of trade credit insurance.
  2. Market credibility: "Buyers have great comfort in knowing that their supplier is in a financially stable position to deliver goods," Cowley said. "Part of that financial stability is the use of trade credit insurance, knowing that the supplier will not fail or go out of business because they were not paid by another company."
  3. Increased sales opportunities: As Cowley worded it, "If I'm willing to sell a customer $100,000 worth of merchandise at my own risk, what would I be willing to sell if I could insure it?" The safety net of a trade insurance policy could give businesses the security they need to pursue new opportunities.
  4. Flexibility: "There is a tremendous amount of customization for these policies," Ferraiolo said. "A company can insure all of their accounts, one account, and anything in between the two." Cowley added: "The product is for them. It's designed for how they do business, not how the insurance company wants them to do business."

Ferraiolo added that there's a backend benefit in the event that insolvency occurs, which is freedom from having to waste management time and effort to chase after salvage – the underwriter will do that for the insured.

The only challenge that Cowley sees in the trade credit insurance market is the competition for coverage. Now more than ever, businesses are scrambling to insure their accounts receivable, which makes it difficult to actually secure coverage, and to make sure that an underwritten plan achieves what the organization set out to achieve. 

But Cowley noted that this is hardly a problem as long as businesses choose to seek insurance through a broker, and ideally, one that will help them keep their plan current.

"These generally aren't policies where the insured buys it and sticks in a drawer until they have a problem," Ferraiolo added. "They're very ongoing, service-intensive policies because the nature of the insured's business is always evolving."

As previously mentioned, it's not just businesses that change, but also the economic conditions in which they operate. Under such uncertain circumstances, the best you can do is protect the assets that matter to your business.

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Businesses, consumers: Should you insure your drones?

Drone coverage will become a more pressing matter as UAV popularity gains momentum.

The use of unmanned aerial vehicles, more popularly known as drones, for commercial and recreational purposes has taken off, and it's left a few big questions up in the air – namely, who should be covered, and to what extent?

It's worth noting that as of this writing, the Federal Aviation Administration does not mandate coverage for UAVs. However, the soaring global market (estimations put its worth at around $21 billion by 2020) may soon necessitate more rigid parameters regarding UAV-related liability. 

Flying into new risk territory

A drone accident can result in any number of losses to the owner of the UAV."

Recreational use will most likely account for the majority of market growth in the next few years, according to MarketsandMarkets. As this happens, consumers will be quite literally flying into new risk territory. In terms of property damages, a drone accident can result in any number of losses to the owner of the UAV, but also to any asset that happens to be in proximity of the device. This includes private assets such as homes, lawn furniture and automobiles, but also commercial holdings, and perhaps most pressingly, critical infrastructure, i.e., power lines and traffic lights. 

Consider, for instance, the historic blackout that occurred in the summer of 2003. A single energy company's failure to trim a few branches near a high-voltage line sparked an outage that left approximately 50 million people without power in the U.S. and parts of Canada. The likelihood of a recreational user finding him or herself in the Kafkaesque position of having induced a nationwide power outage is slim, to say the least. Nevertheless, there are plenty of high-risk liabilities; for example, physical injuries caused by drone accidents or malfunctions, and privacy violations from the camera functionality. 

Likewise, some businesses such as Amazon, UPS and DHL are already using drones for commercial purposes. In order to qualify for commercial use of UAVs, businesses must file for Section 333 exemption from the FAA, allowable under the 2012 FAA Modernization and Reform Act. From there, however, commercial drone liability insurance is entirely optional. 

Gauging risk exposure

"Full liability coverage is the most prudent course of action."

Risk exposure for recreational use of drones is arguably diluted compared to commercial use, if for no other reason than that a business is likely to be responsible for multiple UAVs at a given moment. Drones may range in cost from a few hundred to a few thousand dollars, with the highest-end devices sometimes creeping into the tens of thousands of dollars. Business assets such as these, which are not easily replaced, should invariably be insured. 

Where liability is concerned, commercial drone insurance is generally recommended, but may or may not be a priority deadening on its use. Using drones for conservation or environmental monitoring purposes may have low exposure in regard to human safety. However, using drones for surveillance purposes at urban construction sites, for media coverage during public events or for product delivery in close proximity to people and their private property is inherently more risky. In such cases, full liability coverage is the most prudent course of action.   

Recreational drone use tends to be less risky, but the FAA requires registration of personal drones nonetheless. What's more, recreational use of drones has in fact resulted in serious accidents that necessitate expensive medical treatments. In 2015, a 16-month-old toddler toddler lost an eye after being hit in the face with a drone. This isn't to suggest that all drone users should run out and purchase a plan – however, it's worth considering, especially for drone UAV enthusiasts inhabiting cities and areas with dense populations. 

In conclusion: We recommend complete coverage for all commercial uses of drone, and for recreational users who will be operating their UAV in close proximity to other people and private property.

Flood risk rises in the North, recedes in the South

Flood risks is changing in various parts of the country.

Flood patterns are beginning to change in the United States, according to a recent study by engineers at the University of Iowa. Specifically, the risk of minor to moderate flooding is rising in the North, and receding in the South.

Regional climate shifts may be at fault

"The risk of flooding in the northern half of the country has notably increased."

IU researchers found that the amount of water stored in the ground has gradually increased in northern areas of the country since 1985. Meanwhile, the amount of water stored in the ground in the southern, southwestern and western sections of the country has decreased.

While these findings come mere months after Louisiana experienced a 1,000-year rainfall event that left entire communities under water, many parts of South and Southwest are currently dealing with severe drought. As a result, there has been a net loss in the average amount of water stored in the ground in the southern half of the U.S. 

The increase in ground water in northern parts of the U.S., particularly in the Midwest and the Great Plains, is due to more rainfall in the past half-decade. As a result, the risk of flooding in the northern half of the country has notably increased. 

Interesting timing
In 2015, the Federal Emergency Management Agency began updating its map of flood zones in the U.S. for the first time in three decades. So far, the process has been somewhat bumpy, with multiple erroneous reclassifications having already been documented and corrected. One of the most recent examples occurred in Ocean City, Maryland, where "insurance rates catapulted into six-digit figures," after FEMA classified an area protected by two large dunes as a "high flood hazard zone."

"The City Council proceeded with the only path available – completing a 'Letter of Map Revision,'" Ocean City Today's Katie Tabeling, wrote. "It also authorized hiring a consultant to help with individual properties for a $15,000 retainer." 

Areas that are located next to large bodies of water and are at a low elevation are typically at greatest risk of disastrous flooding events. However, earth with high water retention increases the risk of minor to moderate flooding events, which can result in significant loss for uninsured assets – regardless of whether that asset is in a federally designated flood zone. In the coming months and years, it wouldn't be surprising to see more commercial and residential property holders seek out consulting services for the sake of correcting flood zone status, or conversely, ensuring assets are protected in regions experiencing increased ground water retention.

Commercial transportation: A shifting, not shrinking, market


Uber has no shortage of big ideas: self-driving cars, free-wheeling 18-wheelers, and most recently, a flying-car concept. But the most immediate disruption that needs to be assessed, according to Larry Kalior, founder and CEO of Transportation Insurance Brokers, is how traditional limousine and taxi fleets are responding to ride-sharing services such as Uber and Lyft.


“The limousine space is quickly dwindling because of the ride sharing businesses, both Uber and Lyft,” Kalior advised. “As a result, those companies have shrunk in size or gone out of business, and that’s a huge market shift.”

Kalior emphasized that “shift” is the operative word here. Consider Uber Black and Lyft Premier, the high-end ride-sharing options for each company. These services require the use of luxury vehicles, a commercial license and commercial transportation insurance, which is really no different than a limousine – with one notable exception. Traditional limousines would have averaged, “about 30,000 miles per year on each vehicle,” whereas an Uber Black vehicle will push 80,000 miles, according to Kalior.

“If you do the math, it’s actually no different than a Taxi cab,” Kalior said. As a result, insurers will actually charge much higher rates for Uber Black than they would for a limousine fleet. Already, these pop-up businesses based around premium ride sharing are paying higher premiums. On top of that, and where limousine services have the longer-term upper hand, is the life of the vehicle. At 80,000 miles a year, these luxury cars are run into the ground much more quickly.

More importantly, the real edge that Uber and Lyft have over the traditional luxury transportation market is the application. At what point do limousine services start competing in local markets by leveraging similar technology? According to Kalior, some taxi fleets are already doing just that.


“In some markets, taxis can respond more quickly than Uber.”

Kalior said that he’s already seen promising responses from some cab companies in their attempts to more effectively compete with Uber. He noted an example of one company that has developed its own application. In its local market, the company can actually respond more quickly than Uber. If other taxi fleets begin to explore new technology, such as the development of mobile applications, they may actually be able to offer a consistently superior customer experience.

What’s more, Gizmodo’s Michael Nunez stated that Uber is “losing money faster than any tech company ever.”

In fact, Nunez believes that the only way for Uber to grow its profit margins is to get rid of drivers altogether. Predictions for how soon this will be possible vary, with starry-eyed innovators saying we’ll see millions of driverless cars by 2020. Meanwhile, skeptics contend that a combination of faults in the technology and state- and city-based regulations will keep them off the road in large numbers for many more years to come, which could be a problem for Uber.

It’s also worth noting that not all state and local governments have legislation that ride-sharing companies find favorable. For example, after Austin, Texas, legislators mandated fingerprint-based background checks for ride-sharing drivers, Uber and Lyft packed up and left. In cities and states where Uber isn’t required to adhere to the same laws as other commercial transportation companies, more contention may lurk around the bend.

Last but not least, there has already been controversy based on Uber’s current insurance model, in which the driver is only insured while the app is on. The rules vary between states, and with a few exceptions (notably California), most only require ride-sharing services to insure drivers that have a passenger in the car.

The problem here is that if an Uber driver gets into an accident on his or her way to a customer in certain states, that driver will have to make a claim with a personal insurer. When the insurer finds out the car was being used for commercial purposes, the claim will probably be denied. This issue has come to a head in several states, and in the long run, it may cause more problems for ride-sharing companies.

On the surface, the momentum certainly appears to be in Uber and Lytf’s favor – and there’s no question that ride-sharing has shaken up the market. Nevertheless, if Nunez and Kalior are correct, then Uber and Lyft have just as many hurdles to overcome before they can emerge the victors.

For now, we’ll have to accept that this is a disrupted market in flux, and what happens next remains to be seen.