Chances are good you’ve arranged a ride using popular services such as Uber or Lyft. These transportation network companies (TNCs), or ride-booking services you access via a mobile app, are expanding in cities throughout the country.
But here’s what you might not know: Drivers who provide transportation are using their personal vehicles. And when borrowers have a loan on a vehicle they drive for a TNC, this poses new risks for your credit union.
While various personal auto carriers offer ride-booking endorsements that cover losses sustained during TNC activities, it’s important to note standard personal auto insurance doesn’t.
This means use of vehicles for these purposes could cause issues for lenders—like your credit union—should physical damage occur. Some states require TNC drivers to register themselves and their vehicles, and might require them to notify lienholders.
Model state legislation doesn’t require TNC drivers to have comprehensive and collision insurance coverage on vehicles that have liens.
Although a few TNCs have developed their own insurance options for drivers, these programs might not provide sufficient protection.
Combined with a lack of state legislation, this puts credit unions at risk if borrowers don’t maintain adequate coverage for their vehicles, as damage to the vehicle could impact the value—and, ultimately, a credit union’s collateral interest.
Research shows that most passengers now choose to use TNCs instead of taxi cabs, and business travelers prefer TNCs over rental cars. Given the meteoric rise in TNC use, credit unions must consider this emerging risk within their auto loan portfolios.
Here are four steps to help credit unions mitigate the risks posed by borrowers who are, or may become, TNC drivers:
1. Understand the risks TNCs pose to your credit union: No matter what size community your credit union serves, it’s likely that some of your members will drive for these companies.
Be aware of the potential insurance gaps these situations present for your credit union.
2. Stay alert while interacting with members: Listen for member statements about their activity, specifically comments about earning extra income by driving-for-hire and specific company names like Uber and Lyft.
3. Alert borrowers to potential insurance issues: When you identify members with auto loans who drive for a TNC, encourage them to check with their insurance provider to confirm whether they are covered for an accident while driving for a TNC.
If not, they should ask how to obtain coverage.
4. Report your findings to your manager: TNCs will continue to grow in popularity, so it is important to stay informed on this growing trend in your community.
This article initially appeared in Credit Union Front Line newsletter, the monthly sales and service newsletter for branch staff and their managers. Subscribe now to the print edition or PDF version.