A three-paragraph section buried in Lyft’s nearly-800-page public offering document sums up the challenges of insuring unfamiliar risks born from newer business models.The ride-hailing company has established an elaborate system through a subsidiary with $863.7 m of capital to effectively allow it to insure its own risk.
The cost of insuring such risks could be a hefty burden for a company such as Lyft. Contributing to the cost is the sheer volume of rides the company provides, logging in at about 2 million a day during the fourth quarter of 2018. Also to blame is the fact that ride-sharing doesn’t have much of a history for insurers to digest. Insurers typically rely on decades of industry performance records to measure the likelihood of certain outcomes and adequately price insurance policies. With too little data, some insurers won’t issue a policy. Others will increase the price to hedge against the lack of information.