CUNA Mutual adds collateral protection for TNCs

October 15, 2015

MADISON, Wis. (10/15/15)--CUNA Mutual Group is enhancing its collateral protection solutions for credit unions to address emerging risks to their loan portfolios related to the growing popularity of transportation network companies (TNCs) such as Uber and Lyft.

A new no-cost TNC endorsement to CUNA Mutual Group’s Collateral Protection Blanket Auto policy protects credit unions from potential loan losses due to damage caused while a borrower is operating as a TNC driver. The new coverage became effective Oct. 1 in most states. State National Companies, CUNA Mutual Group’s alliance partner for Tracked Collateral Protection Insurance, will also add a similar, no-cost endorsement for Tracked CPI customers.

Ride-sourcing organizations such as Lyft and Uber enable individuals to use their personal, non-commercial vehicle as a livery, or taxi-type service, through a mobile app managed by the TNC that connects passengers with drivers. Drivers are attracted by the opportunity to be their own boss, work a flexible schedule and earn extra income.

However, most personal auto policies don’t include coverage for commercial use, and state legislation doesn’t require TNCs to provide comprehensive/collision coverage, said Al Olson, CUNA Mutual Group staff underwriting specialist. As a result, many drivers aren’t aware they may not be adequately covered when driving for a TNC.

“TNC drivers might think their personal insurance will cover them if they are in an accident while ‘on the job,’ but that may not be the case,” Olson said. “If physical damage occurs and there is no insurance coverage, the likelihood of drivers defaulting on their auto loans increases, which creates a potential loss exposure for lenders.”

Although a credit union may have collateral insurance in force to protect its loan portfolio, standard collateral insurance coverage excludes vehicles when used for “public or livery conveyance,” Olson added. “So there would be no coverage for the credit union in this situation. That’s why we created the TNC endorsement to cover credit unions should this occur.”

CUNA Mutual Group’s Discovery Conference, to be held Oct. 21, offers more information on collateral protection on TNCs, including a live chat, “Uber, Lyft and Your Rising Loan Risk,” at 10:10 a.m. (CT). Registration for the event is free.

CUNA has written to the Federal Trade Commission outlining its priorities and areas of concern regarding some TNC operational practices.

In particular, CUNA is concerned that credit unions receive the right statutory protections to prevent exposure to losses in their role as lienholders on vehicles used by TNC drivers. CUNA has encouraged states to require TNC drivers to have comprehensive and collision insurance through all three phases of TNC operation: when the app is activated but driver and passenger are not matched; when a match is made and the driver is en route to the passenger; and when the passenger is being transported.