Uber’s valuation is $80-$90 billion despite slowing revenue and user growth and the loss of $1.8 billion last year alone when excluding certain business sales, according to its recent IPO filing with the Securities and Exchange Commission. The offering will be the biggest share sale since Alibaba Group went public on the New York Stock Exchange in 2014. Uber insurance risks are also outlined in the IPO, and detailed below.
Uber categorizes its business areas into three large, fragmented markets: personal mobility, Uber Eats, and Uber Freight. The public offering comes shortly after competitor Lyft’s IPO in March 2019 at a valuation of $24 billion
In 2018, 4.1 billion Uber riders traveled about 26 billion miles in 63 countries. Between 2016 and 2018, revenue from ridesharing grew from $3.5 billion to $9.2 billion.
In an average of five minutes after tapping a button, Uber riders are able to access a safe and affordable driver to transport them to their destination of choice with varying service levels, price points, capacities, and modes of transportation including cars, rickshaws, motorbikes, minibuses, and taxis.
The company offers the premium Uber Black service, the more affordable UberX service, and its cost-splitting UberPool service, the large group Uber Bus service, among other ridesharing options. The application automatically updates to display the available options in any particular city based on the rider’s location. For example, San Franciscans will see the option to choose to ride in an UberX or hop on a Jump dockless e-bike, while New Dehliites will see the option to ride in a rickshaw from Uber Auto or rent a car from Uber Hire.
Alternatively, since the company acquired Jump in 2019, riders may elect the option of using one of the company’s dockless e-bikes and e-scooters for shorter trips, especially in urban areas with heavy rush hour traffic. These new mobility offerings are GPS-enabled and equipped with electric motors for more efficient travel.
Users of the company’s food delivery service, Uber Eats, can order a meal from one of more than 220,000 restaurants in over 500 cities and have it delivered in an average of 30 minutes. This service also provides Uber ridesharing drivers with a second source of work during non-peak ridesharing times. McDonald’s has an exclusive deal with Uber Technologies Inc., which the fast food chain is currently renegotiating to give itself options to also work with other delivery services.
Last year, Uber Eats tripled its revenue to $1.5 billion, despite an ever-expanding number of competitors including GrubHub, DoorDash, Postmates, and Amazon that are well-capitalized and offer discounted services. Certain competitors, like Swiggy and Zomato in India, have substantial competitive advantages in foreign markets due to substantial market-specific knowledge, established relationships, greater brand recognition, and more supportive regulatory regimes. Additional revenue comes from restaurants that pay for personalized, sponsored advertisements that appear in the application.
Finally, Uber Freight is an on-demand marketplace that connects shippers of all sizes and carriers with the most appropriate shipments available on the company’s platform while also providing upfront, transparent pricing and real time tracking. Uber Freight has contracted with more than 400,000 drivers and over 1,000 shippers to generate over $125 million in revenue for the last quarter of 2018. Uber Freight also announced its expansion into Europe in March 2019.
Uber utilizes a network of independent contractors who have earned over $78.2 billion driving people and products since 2015, plus an additional $1.2 billion in tips since July 2017. Uber pays drivers either at the end of each week or, in select American cities, through Instant Pay which pays drivers up to five times per day. The company’s predictable, on-demand scheduling allows drivers to work schedules based on their personal preferences. Additionally, the recently launched Uber Pro program provides drivers with a chance to earn discounts on vehicle maintenance and tuition reimbursement through Arizona State University Online.
The classification of Ubers drivers as independent contractors rather than employees who are afforded more legal protections is of particular importance to the company’s success, even as it is being challenged in courts and by governments across the world. Uber argues that its drivers are independent contractors because drivers choose whether, when, and where to work on the platform, may work for Uber’s competitors, and use their own car when working.
In addition to previously settled cases, over 60,000 drivers have filed or intend to file arbitration demands asserting that they are actually employees. In the event that Uber is required to reclassify some or all of its drivers as employees in certain areas, the company will face significant additional expenses to pay drivers in compliance with applicable wage and hour laws. Uber may also face liability for employee benefits, social security contributions, taxes, and penalties. Such a reclassification would require Uber to fundamentally reorganize its business model, according to the firm.
Uber is a party to numerous legal actions and government investigations, including employment classification class actions such as the O’Connor, Yucesoy, and Aslam cases; the Levandowski case involving self-driving car technology; criminal prosecution in Copenhagen; and the November 2016 Data Security Incident.
Uber insurance coverage for other corporate risks includes general liability, workers’ compensation, property, cyber liability, and director and officers’ (D&O) liability. Uber may also be liable for deaths and injuries resulting from traffic accidents involving its drivers, riders, and other third parties.
The company may also face liability for claims by drivers for the actions of riders and by riders for the actions of drivers. To cover these liabilities, Uber has auto liability insurance policies, however these Uber insurance policies may not cover all potential claims or may inadequately indemnify the company for such liabilities.
In most countries, drivers are required to carry automobile insurance. Plus, the company maintains insurance on behalf of drivers in many cases. Uber also self-insures and owns a captive insurance subsidiary.
According to the Uber website, the following types of insurance coverage are maintained for drivers.
- When the driver is off-line or the Uber app is off: The driver’s personal insurance company and coverages apply.
- When the driver is available or waiting for a ride request: Uber maintains auto insurance on behalf of the driver in case of a covered accident. This includes third-party liability if the driver’s personal auto insurance doesn’t apply, with $50,000 in bodily injury per person, $100,000 in bodily injury per accident, and $25,000 in property damage per accident.
- When the driver is en route to pick up riders and during trips: Uber maintains auto insurance on behalf of the driver in case of a covered accident. This includes $1,000,000 in third-party liability, uninsured/underinsured motorist bodily injury, contingent comprehensive and collision, up to the actual cash value of the car ($1,000 deductible).
Details of driver-related insurance coverage are available at Uber.com.
Uber Insurance Panel Counsel Consideration
Insurance defense law firms that hope to gain work as Uber panel counsel candidates will want to familiarize themselves with the many Uber insurance strategy details contained in the IPO filings. Some of the Uber insurance defense work may also be available through primary or secondary insurance companies.
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This article is provided for educational purposes only. The information reported is believed to be accurate but is not guaranteed. This is not to be interpreted as legal advice or an opinion in regard to any topic discussed (we aren’t lawyers!).