IN AUGUST 2014 Council member Kunselman, (D-Ward 3), tried to convince his colleagues on City Council that it was unsafe and unfair to allow Uber and Lyft to continue to operate. Kunselman said that the companies skirt regulations and should be required to pay for commercial insurance.
Turns out concerns about Uber and Lyft are merited. For starters, the companies both scored the lowest possible rating from the Better Business Bureau, a consumer advocacy group. Thanks to over 100 complaints about price gouging related to the companies’ “surge pricing” strategy, the BBB rated both Uber and Lyft “F.”
In addition, Ann Arbor users of Lyft and Uber pay some of the highest rates in the U.S. The cost of maintaining a car in Ann Arbor is $13,460 per year. That’s thousands less than the annual cost of relying on Lyft ($21,091/maximum of 13 rides per week) or Uber ($24,165/maximum of 11 rides per week), according to NerdWallet.com analyses. Only New York, San Francisco and Austin users of Lyft and Uber pay higher annual rates than do riders in Ann Arbor.
“The reason these companies are making a profit is because they’re cheating the law,” Steve Kunselman said at a Council meeting last August. He went on to argue that asking all Uber and Lyft drivers to be registered with the city and to follow the same state laws which govern limo drivers would be in the “best interest of public safety.”
Christopher Taylor (D-Ward 3) responded to Kunselman’s proposal by saying, “The proposed changes would remove these services from Ann Arborites and I think would harm the quality of life for people in the city.”
Jack Eaton objected to unregulated Uber and Lyft drivers on other grounds. He said, “Self-regulation offends me when we’re talking about public safety.”
The Better Business Bureau, which was founded in 1912, is not a government agency, nor does it have regulatory or enforcement power. It was started primarily to protect against abuse of advertising by companies, as well as to alert the public about potential fraud.
Last week, the HuffingtonPost.com reported: “The car service app was given an F rating from the Better Business Bureau, the consumer advocacy group. Over 100 complaints about the company’s surge-pricing strategy, and other issues, led to the bad review.”
The BBB’s report says, “Some consumers claim that they were told the final cost of the transportation service the company provided (through Uber Technologies’ phone app, the driver, and the consumer’s receipt), only to be subsequently charged a substantially larger amount.”
Airline companies and hotels practice surge pricing and increase prices during holidays and other busy travel times. But the HuffingtonPost.com reported that, “Uber riders complain that they’re not adequately informed of how high their trip’s cost will be. In the early months of the company, customers were livid after being charged hundreds of dollars for rides on New Year’s Eve. In some cases, users claimed they weren’t notified about surge pricing until after the trip.”
Uber has repeatedly defended its surge pricing practice, saying that it is the company’s way of keeping enough drivers on the road when demand for the service outweighs the supply.
“Uber’s direct channel for two-way feedback is regularly reviewed and acted on to ensure a high-quality experience,” an Uber spokeswoman said in a statement. “The fact is that consumers in 220 cities around the world have made their opinion known by taking millions of rides with Uber.”
Uber officials say the company has taken steps to notify customers about fare increases before they agree to them. When surge pricing is in effect, for instance, customers must enter a confirmation in the app that they accept the increased fare before taking the ride.
Lyft, Uber’s largest competitor in the hail-a-ride market, was also given an “F” grade by the Better Business Bureau. Lyft employs similar pricing models and warnings in its smartphone app.
Crunching the Numbers
Ridesharing has been touted as a money-saving alternative to car ownership. NerdWallet.com analyses dispute that assertion.
The NerdWallet.com report says “in every city we analyzed, owning and maintaining a car is less expensive than taking Lyft and UberX for every trip.”
NerdWallet’s analyses help identify cities where driving is the most economical option and provides a general look at the cities where you should consider taking Lyft and Uber instead of driving.
The report is clear, however: Getting around solely by rideshare is more expensive than owning a car, especially in Ann Arbor.
NerdWallet analysts used a 2014 Toyota Camry as their model. Ownership costs broke down to carrying costs – taxes and fees and depreciation, etc. – and operating costs – maintenance, repair, parking, insurance and yearly gas costs.
This is how NerdWallet came to the Lyft and Uber costs:
We calculated Lyft and Uber costs with numbers from the federal highway administration and census bureau to approximate car usage. We used the rates provided by Lyft and Uber on their websites to calculate cost per mile, cost per minute and the base rate for each ride. We didn’t account for surge pricing or Lyft Line or Uber Pool — the carpool rideshare options that can cut costs up to 50% less than our estimates.
To figure out car usage for each city, they used Federal Highway Administration averages for the number of trips a typical driver takes in a day and the number of miles those drivers travel daily, as well as the average one-way commute for each city provided by the U.S. Census Bureau.
Cities with effective public transportation — New York City, San Francisco, Philadelphia, Chicago, Boston — have lower annual transportation costs; in cities with more expensive public transportation — such as Ann Arbor — people rely primarily on cars.
Think you could swing living in Ann Arbor sans personal vehicle? NerdWallet suggested parents, folks with long commutes and those in cities without rideshare hold onto their cars, while ditching a car might be a more feasible option for people with “checkered” driving pasts, those who own luxury cars with high insurance and maintenance costs and those with short commutes or easy access to public transit.
Thank you for the information. According to you. Which ones are the best hours? I would not want to sit in my car waiting too long for some one to book a ride.
I’ve used the ride sharing services in Ann Arbor. I had a nice driver, but it cost almost double what a cab ride cost for a lift to the same location and the same time and day of travel. The buses in Ann Arbor run too infrequently to be used on the weekend for shopping and errands. Uber and Lyft are like Whole Foods, expensive and cool, and not for the Kroger/Meijer’s shoppers.
@Eva, one of our writers used ride sharing to an event he was covering. It cost over $30 for a 8.4 mile round trip ride. Amazing Blue Taxi charges $2.50 per mile and a $3.00 fee ($27 for the ride). AAATA would have cost $3.00 roundtrip, but taken 2 hours or more roundtrip.
Operating outside the law, gouging customers…hmm…sounds like good old American capitalism to me.
The case of Syed Muzaffar, an Über driver charged with vehicular manslaughter after killing a 6-year-old girl in an accident in San Francisco, raises serious questions regarding exactly who is responsible when rideshare drivers are involved in accidents. Über is denying liability because Muffazar was not carrying a passenger at the time of the accident. Victims will have difficulty obtaining compensation for their injuries in these situations, absent specific laws and regulations that define car accident fault, insurance and compensation requirements for rideshare companies.
http://www.nbcbayarea.com/news/local/Uber-Driver-Arrested-in-San-Francisco-Crash-That-Killed-Girl-238491691.html
Their commercial insurance is not the same as what taxis and limos have. It covers them only when they have been assigned a trip through the app – this according to Michael White, Uber Manager. However, at least according to what I’ve heard and read, it does not cover them when not doing a trip through the app – which means that if they do a “walk-up,” they may not be covered. Even more importantly, doing commercial services violates ALMOST EVERY personal insurance policy – which means that drivers are likely not to be covered by any insurance when not running a trip. With Michigan laws, taxpayers or insurance companies will be eating the expense for this liability, instead of Uber and Lyft drivers or customers. I do not believe that these drivers are telling their insurance companies what they are up to.
@Jeff, anytime the BBB, an independent agency that has been looking out for consumers for 80+ years, gives a business the lowest possible rating, that’s news. That Ann Arbor users are being charged some of the highest rates in the country is news, as well. Why do users in a small, midwestern town pay higher rates and fees than people who live in New York and Seattle? It’s a question that begs for a discussion. Glad to have your thoughts on the matter!
“Turns out concerns about Uber and Lyft are merited.”
I’m sorry, but this assumption appears to be entirely predicated on the BBB’s rating and information from a single source, the Huffington Post. As such, it’s bunk, for the reasons described below. (And just to clarify at the onset: I am not employed by or affiliated with Uber, Lyft or any other rideshare company in any way. I’m merely tired of newspapers publishing misleading and/or false information about the services.)
“Thanks to over 100 complaints about price gouging related to the companies’ ‘surge pricing’ strategy, the BBB rated both Uber and Lyft ‘F.'”
Surge pricing is not “price gouging,” which I say as an expert in consumer protection law. “Price gouging” is a legal term of art under both state and federal law, and surge pricing doesn’t fit it for the same reason that airlines and rental-car agencies that jack up prices around the holidays are not engaging in “price gouging.” This is all relatively simple supply-and-demand economics. During surge-pricing periods, passengers can choose convenience-at-a-cost (Uber/Lyft); varying levels of inconvenience at a lower cost (such as waiting an hour or more for a taxi cab); or possibly extreme inconvenience at zero cost (walking home, potentially during the dead of winter).
Moreover, both Uber and Lyft are *entirely* upfront about when surge pricing (or “Prime Time,” in Lyft’s parlance) is in effect: passengers are told BEFORE requesting a car from either service not only that it’s in effect, but also the multiple above the services’ usual rates. Neither Uber nor Lyft is to blame for passengers deciding they don’t like surge pricing *after* agreeing to pay for it, and complaints on that basis are effectively meritless.
Further, the BBB gives companies an “F” if they do not resolve disputes to a customer’s satisfaction. Since neither Uber nor Lyft provides refunds for surge pricing — for entirely valid reasons — these disputes thus always remain “unresolved,” resulting in F ratings. Finally, had you done your homework instead of sourcing your data entirely from a HuffPost article, you would have found that taxi companies nationwide almost invariably have F ratings as well.
“‘The reason these companies are making a profit is because they’re cheating the law,’ Steve Kunselman said at a Council meeting last August.”
Was this at the same meeting where the City Council voted 8-3 to authorize the city administrator to negotiate operating agreements with Uber and Lyft, including insurance requirements and driver background checks? (even though both companies already have commercial insurance and a background-check protocol much *more* extensive than that of most taxi franchises) If so, I find your use of this quote odd, to say the least, not to mention your failure to mention the Council’s vote.
“Kunselman said that the companies skirt regulations and should be required to pay for commercial insurance.”
Uber and Lyft *do* pay for commercial insurance, for all times when a passenger is being given a ride or a driver is en route to pick one up. Requiring commercial insurance at ALL times, however, is overkill, particularly considering a) 70% of rideshare drivers drive less than 15 hours a week, and b) in Ann Arbor, the large majority of them are students for whom commercial insurance would be prohibitively expensive.
“The BBB’s report says, ‘Some consumers claim that they were told the final cost of the transportation service the company provided (through Uber Technologies’ phone app, the driver, and the consumer’s receipt), only to be subsequently charged a substantially larger amount.'”
Considering the Independent is a publication presumably staffed with professional journalists, I’m surprised that its op-ed department takes assertions of this nature at face value, without bothering to check their veracity.
“In some cases, users claimed they weren’t notified about surge pricing until after the trip.”
See above.
“Ridesharing has been touted as a money-saving alternative to car ownership.”
For some people. It should be stating the obvious that ridesharing isn’t a cost-effective means of transport if, say, you’re a parent who drives 200 miles a week shuttling kids to school and oneself to work. It should also be stating the obvious that ridesharing will always cost more than car ownership in sprawling cities with huge suburban areas, e.g. Los Angeles and every large city in the South. If you’re a Michigan undergrad living on campus, on the other hand, and only need trips by car a handful of times a month, ridesharing is *far* less expensive than vehicle ownership.
“The report is clear, however: Getting around solely by rideshare is more expensive than owning a car, especially in Ann Arbor.”
It would have been nice if you’d provided the link to the NerdWallet report, but I found it on my own:
http://www.nerdwallet.com/blog/insurance/2014/10/14/avoid-car-insurance-costs-lyft-uber/
Having seen it, I have to call bullsh*t. The report claims that car ownership in Ann Arbor is cheaper than that in New York City! Come *on* now. Even if you *haven’t* lived in New York (I have btw), this claim doesn’t pass the smell test. Clearly they didn’t factor in the not-so-minor detail that it can cost $800 a month simply to *park* in Manhattan (meaning overnight parking). I also question whatever car insurance estimates they obtained, seeing as my own vehicle insurance literally doubled when I moved from Texas to Manhattan. (I sold my car shortly thereafter.)
Also, every study done on ridesharing to date indicates that in larger cities, Uber and Lyft and their ilk are overwhelmingly used in combination with subways, buses and even taxis; this multimodal variety of transport is almost certainly less expensive than car ownership in a city such as NYC or San Francisco. (For reference’s sake, an unlimited-use NYC MetroCard costs $112/month.)
Finally, I find it fascinating that the Independent is apparently ignoring the NUMEROUS public-policy benefits associated with Uber and Lyft. U of M is one of the largest universities in the nation, with over 43,000 students total. It’s stating the obvious to point out that many of them, particularly undergrads, go out on weekend nights and drink to the point of extreme intoxication. Given the broad lack of availability of taxis or public transportation at last call on weekend nights, far too many of these students make the choice to drive home drunk. On this basis *alone*, ridesharing is a major plus, both in Ann Arbor and every other city with a large population of college kids.
Actually, the NerdWallet study takes into account parking costs that are adjusted based on each cities cost of living.
Jeff K;
First, I am a bit confused about one aspect of your post: You seem to take issue with the statement that car ownership in Ann Arbor is cheaper than New York, and then you cite all the examples of great expense of car ownership in New York.
But let me clear up a couple of very popular misunderstandings. Nearly all auto personal insurance issued in the US prohibits commercial use, and nearly all commercial policies forbid personal use. The insurance industry sees “car sharing” as taxi work, which is the highest risk exposure for passenger vehicles. In California taxi insurance runs between $8-14K per year per vehicle.
There are three public groups that need to be protected while engaged with taxi-like transportation. Drivers, passengers and the general public. The risk exposure comes while driving with passengers on board, looking for passengers, and engaged in related activities (more on this below).
What is confounding to insurance companies is how to assess what behavior is commercial and not, and when it occurs. And the determinant is most likely the courts, not the insurance agencies. There are legal precedents that hold the employer or transportation company liable when the driver is on the way home from specifically driving for revenue or business purpose or when taking a break while specifically driving for revenue or business purpose. This is where the need for true 24/7 commercial insurance comes into play.
The insurance policies offered by the TYNCs falls woefully short on a number of points. First of all, the coverage is only in effect when the driver app is on. Passengers are not covered after closing the car door and walking across the street after the app is turned off or ride completed. Drivers are not covered when they have to turn the app off because of a driving error, or a passenger too drunk to give proper directions. Many examples of rides provided by TNC’s with the app off will illustrate how frequent the risk is. Web forums such as uberpeople.net and reddit.com are good sources for this info. Also, if a driver accepts a direct pay from a customer with the app off, no insurance.
Secondly, you have erred in describing the TNC coverage as “commercial”, rather it is excess lines insurance that is not bound by state laws that obligate them to compensate injured or damaged parties. Rather, these policies specifically protect the TNCs, and act only when the TNC’s direct them to pay the injured parties if they so chose. Just think for a minute about when your insurance company paid for an accident that you were sure was the other person’s fault. Can you tell your insurance company to deny the other person’s claim and “not give that jerk a dime”? But TNCs can. True “admitted carriers” are obligated by law to pay the injured parties by standards enforced by regulation. The result is big savings for the TNCs and a resulting trail of tears for low paid TNC drivers who are frequently immigrants, down and out mothers, and husbands long out of a good job. With family cars wrecked, there is no more work, big repair bills and maybe personal liability. Lawsuits can be initiated by those that understand how that process works, but not in time to buy the groceries, make the mortgage or get the family car back on the road.
Next, reported accidents with TNC vehicles nearly always cause the loss of personal insurance for the driver and a denial of claim. While TNC insurance protects the public under some auto accident circumstances, there is little to nothing to fairly compensate a driver for damage to their car or injury to themselves.
The highest risk comes from TNC trying to hold themselves totally harmless from the consequences of the conduct of their riders or passengers. Both users and drivers must hold TNCs completely harmless in all circumstances in order to participate in the ride share scheme. Hence, the hammer wielding driver in San Francisco is not their employee or agent, and the conduct was not part of driving them. So, no insurance, no deep pockets, and hence, protracted litigation tied up for years before injured parties are compensated or vehicle repair costs reimbursed.
Licensed transportation companies accept responsibility for their employee’s actions and harm to their passengers, public, and drivers no matter what happens. Additionally they have general liability policies that cover all circumstances even if the harm is not specifically tied to an action with a vehicle, such as a hammer wielder or sexual assault examples already recorded. In the transportation world, this greater obligation of protection is called “duty of care” and courts hold these providers to a higher standard of liability. Corporations are now back-pedaling, getting travel policies in place to move their executives out of TNC vehicles and only into regulated taxis and limousines that will acknowledge their industry responsibilities and have proper insurances and acknowledge their duty of care.
The head of California’s PUC Michael Peevey is aware of these shortcoming and has proposed that all California TNC vehicles have true commercial coverage. We will see if that is enabled before the end of this year.
Finally, i specifically take issue with your statement about the “NUMEROUS public policy benefits” of ride sharing. The use of a chauffeured ride instead of driving yourself does not decrease the use of automobiles, rather it increases it. Hiring someone to first drive to your pickup location and then drive you to where you would have driven yourself and then return to an area of likely subsequent business for the provider will create more traffic, pollution and waste of natural resources than the use of your own vehicle. The further away from a city hub you travel, the worse the issue becomes with the driver making essentially a round tip to take you there and then another round trip to bring you back. The economics of hiring a driver, just like having a house cleaner or nanny will never be cheaper than doing it yourself. There are already a few studies done on the economics of transportation networking companies (TNCs) and none point to any real savings. In a few cases where travelers live in a dense urban environment and do not travel outside of that zone then there is there a benefit. Hence the NY standard where car ownership is lower than the rest of America and taxis and black car services prevail.
The TNC convenience model is built on a large number of vehicles ready nearby at any time for passengers to summon. This solution to the demand issue creates long hours of driving with few passengers and also low wages in many areas. This summer, TNC drivers in Texas waited a airports in sweltering heat with their cars running for hours with the air conditioning on hoping for a summoning ride. In Los Angeles, scores of personal cars swarm nightclub areas in search of revelers and wind up driving 2-3 times the true revenue miles and earn far less than minimum wage.
Municipalities need to focus on car sharing, biking, and true ride sharing, with shuttles, commute vans, shared long distance (not for profit) trips, buses and other transit methods available through the web or mobile apps. Look now at such successful services rising in England, France and Germany. This socially engineered transportation solution should be a larger part of urban planning than it is today. There is even a new minim bus app that competes with municipal fixed routes. Routes are created on the fly by passenger demand. The cost now is about $5, more than a municipal bus but lower than taxis and TNC. Municipalities need to create goals around taxi-like transportation. San Francisco restricts taxis to hybrid vehicles and their airport requires shuttle vans to be powered by compressed natural gas. Airports around the world have adopted electric vehicles for terminal shuttles and one airport in Germany now has 170 Tesla all electric vehicles as taxis. This is true community benefit that acknowledges all members of the community as stakeholders, not just passengers in search of convenience.
Orlando, Washington DC, and Chicago have announced goals or plans to create city-wide mobile apps like the TNCs have shown us but include bus and light rail as well as taxi and limousine.
These two similar articles illustrate the troubling determinations that prevent insurance companies from wanting to insure amateur taxi drivers using their own vehicles part or full time.
http://insurancethoughtleadership.com/california-law-on-uber-et-al-model-for-all-states/#sthash.d4FGOogA.uI6KAIUo.dpbs
http://insurancethoughtleadership.com/insuring-uber-et-al-a-rollercoaster-ride/#sthash.ZHtwO9HR.7ClIpltz.dpbs
Another author proposes some solutions to the legal and regualatory issues surrounding insurance.
http://insurancethoughtleadership.com/insuring-uber-et-al-a-rollercoaster-ride/#sthash.ZHtwO9HR.7ClIpltz.dpbs
App based TNCs offer many advantages to urban transportation but bring with them a new set of problems. There is not easy answer here and municipalities have a large role in engineering a fair solution for passengers, drivers and the public.
Take a look at some other ideas about a solution.
https://plus.google.com/110116137616125452353/posts/AevYWfFhHo4
I find it interesting that companies such as Uber/Lyft appear to skirt the rules on how they do business — and somehow that is ok with some politicians. But, when Tesla wanted to open up shop in Michigan and sell directly to the customer, then politicians weren’t ok with that. Politicians will cite innovation when it suits them, but then they will ignore innovation when it suits them as well. There is inconsistency.