Because of this, both companies have had to manage the risk largely on their own, and are devoting increasing amounts of capital to mitigating those risk factors.
Uber relies on a combination of third-party insurance and self-insurance to protect its business, particularly against the automotive, driver and passenger risks related to its ride-sharing business.
But as the company’s offerings extend to include freight, autonomous vehicles and electric scooters, among others, its insurance needs are expected to grow as well, Uber said in regulatory filings announcing its initial public offering.
Uber’s insurance reserves totaled $2.94 billion at the end of 2018, up from $2.0 billion at the end of 2017, according to regulatory filings made public Thursday. The company’s insurance reserves totaled $712 million at the end of 2016.
Lyft, which went public last month, set aside $863.7 million in its captive insurance subsidiary at the end of 2018, compared with $360.9 million the year before.
These disclosures illustrate the challenge for companies engaging in new business models and facing unfamiliar risks: Insurance companies don’t have enough information to price coverage in a way that would make these new businesses economically viable.
Uber and Lyft aren’t alone in this. Other businesses in the so-called sharing economy such as Airbnb Inc. are in a similar position—and have found it easier and more cost effective to establish captive insurance units to manage the risk internally. These businesses know their operational risks well, and have access to information not available to a third-party insurer.
An Uber spokesman declined to comment beyond the company’s regulatory filings. A Lyft spokeswoman declined