How to Insure Transportation Network Companies: A Detailed Guide to Getting your TNC off the Ground
Written by Laura Loftus on Monday, May 6th, 2019
Whether you are looking to start your own Transportation Network Company, On-Demand Delivery App or other Shared Economy business, one of the most important factors to consider is insurance! Sounds boring, I know. But as the world around us changes, insurance markets for transportation network companies are creating new structures and products. As an independent agency, American Business Insurance has direct relationships with all insurance companies currently writing specialized policies for transportation network companies.
Finding insurance for transportation network companies or other app-based businesses is no easy feat. As you may have already come to realize, most of your local brokers who specialize in personal lines don’t have relationships with insurance companies in this space. Many local brokers don’t understand what information to collect from business owners to present your transportation network company in the most insurable light.
Finding An Insurance Broker To Write Policies For Your Transportation Network Company
Most of the common insurance companies you may have already heard of are not writing policies because of the high-risk nature for transportation network companies. Insurance companies who are writing policies for transportation network companies are Surplus Lines carriers whose focus is in this specialized, technology driven market place.
Some people think that it is easy to join the long list of people who are trying to start transportation network companies to compete with those already dominating the world – Uber and Lyft. But in reality, the people who have created these transportation network companies worked for many years prior to actually launching.
To some, that might seem like a really long time but when an experienced insurance broker who is familiar with writing policies for transportation network companies asks you to assemble a list of items, it’s best to know exactly what you are getting yourself into. Don’t be fooled, there is a lot of prep, time and money that is required to build transportation network companies like Uber or Lyft.
Minimum Premiums For Transportation Network Companies
As you might have anticipated, buying an insurance policy for transportation network companies is not cheap since most insurers in this space have minimum premiums of $75,000-100,000. We know, that is a lot of dough! The good news is, most of the carriers will accept a portion of that up-front and some even offer premium eroding endorsements. This means if your business doesn’t generate premium up to that amount within the year, they will carry over the credit to the following year.
Obtaining a quote requires you to find a broker who specializes in writing insurance for transportation network companies. Working with the right broker will not only save you time and money, but prevent you from buying coverages you don’t need and making sure that you have the ones you do. An experienced broker who is familiar with writing insurance for transportation network companies will know exactly what information to collect from you. They will also know how to present it best to the insurance markets who are writing policies for transportation network companies.
American Business Insurance Services, Inc.
Lucky for you, you found us! As an agency, we have been around long before ordering a ride from your smart-phone was an option. We specialize in public auto which means we understand more than anyone how transportation network companies operate.
Items Transportation Network Companies Should Have Ready Before Calling Your Broker For A Quote:
Build the App:
- One of the first questions I ask customers looking for insurance for transportation network companies is if the app is complete. Insurance company underwriters will want to download your app and make sure it’s working. Also, some companies have technology-based policies, meaning they integrate with your app to capture data on the drivers. Some even offer lower insurance rates based on favorable data collected (less speeding, hard stops, etcetera). Most policies for transportation network companies are usage based, so they have to be able to download your app and make sure it’s compatible with their insurance structure. Insurance companies often want to be able to pull reports from your app which include and are not limited to:
1. Knowing When A Trip Starts and Stops
2. How Many Miles For Each Trip
3. How Many Minutes/Hours For Each Trip
Business Plan & Projections:
- There is a checklist of items the insurance company will want to see attached to the submission your broker sends. Your broker should be narrating to the insurance company all the hard work and thought you’ve put into creating these transportation network companies. Insurers will want to see a “pitch deck” which is something you might already have created to obtain investors. This document will present and explain your business model, why it is different from what is alreadyout there and how it will work long term. Some of the questions this document should answer are:
1. What are the company’s growth plans?
2. How will you monitor safety/loss control?
3. How is pricing structured so that the company is profitable?
Safety and Training:
- Safety and training is a big deal for insurers who are writing policies for transportation network companies. They will want to know what restrictions, checks and balances and training you will provide to drivers. They want to know how often you will check driving records and how often people have to pass background checks. The younger in age the drivers are that you allow to join your transportation network companies, the more expensive you can expect your insurance prices to be. Insurance companies want to know how you are going to prevent accidents from happening so that you build a positive reputation within the industry along side other transportation network companies like Uber and Lyft.
Bios on Key Officers/Investors:
- Insurance companies want to know about the people behind the transportation network companies! If you want to join the group of dominating transportation network companies, they are going to want to know what experience you have, not only in transportation but also in being an entrepreneur. Take the time to write detailed bios for yourself and all other key members, officers and investors behind your transportation network company. Make sure to detail the knowledge and life experience you are bringing to the table in starting transportation network companies like Uber and Lyft. A well written, detailed bio will separate your company from all the rest and will give you a better advantage to better pricing on insurance for transportation network companies.
Terms of Service & Privacy Conditions:
- Although this may seem like a small piece of the puzzle to getting insurance for transportation network companies, most insurers want to see the liability of the app in regards to what they are promising to both their drivers and users. If you are a peer to peer platform, they want to see how the transaction will take place. Some of the questions that should be answered here are:
1. What Security Measures Are In Place To Protect The User?
2. How Should Complaints Be Filed?
3. What Terms and Conditions Does Your Company Adhere To?
Financial Balance Sheet:
- Basically, a lot of what it takes to insure transportation network companies is having money, and a lot of it. Due to the hefty size of the minimum premiums for transportation network companies, generally ranging from $75,00-100,000, insurers want to make sure you not only have money to pay for the policy, but to also keep your business afloat and operating before you start turning a profit. It’s no secret that most transportation network companies do not profit until after the first year. Insurers want to see that you have raised money, not just for the cost of insurance but also for operating expenses, advertising and promotions.
- When I review the balance sheet for transportation network companies, I know that most insurers want to see that you’ve raised at minimum $250,000-$1,000,000 in capital. Sometimes more. The reason for them wanting transportation network companies to raise this much money is because they know what it takes to gain traction in this unique space. They want to make sure the work they are putting in to quote and bind your policy will create a lasting relationship with you.
Guidance From American Business Insurance Services, INC
Starting any business takes time, research and money. We get phone calls from people daily thinking they are going to be the next Uber and Lyft. And believe me, we want you to make it big and compete against the monopoly that currently exists for transportation network companies. But in reality, we know that few of the phone calls we receive have actually taken the above steps which are required to make transportation network companies insurable.
If you have questions or need guidance, please give us a call and we will be happy to discuss over the phone! While some of the larger, corporate run agencies have the same relationships as us, few will offer the personal touch and value we have with every client.
Additionally, we have exclusive contracts with some companies that allow us to write at a lower minimum premium than others. We are an independent, family-run business with 75+ years of combined experience in the business insurance industry. We have invested in other transportation network companies, peer to peer and shared economy types of businesses. Most of us utilize transportation network companies and peer-to-peer apps regularly.
We literally have boots on the ground in this space and if you want the best pricing with the smoothest transaction – we are here for you!