Uber and Lyft are hugely popular in cities and have gone a long way to make it easier to get from Point A to Point B.

But according to the insurance industry, the ride-sharing giants are missing steps along the way that could lead to serious problems for both drivers and passengers in the case of an accident. More details:

A complex web of coverage: As Fast Company notes, insurance coverage for drivers using their personal vehicles to ferry passengers for one of these services (classified as “transportation network companies” by law) varies significantly based on the type of vehicle and how it is being used at a given moment. Uber’s high-priced black cars, for example, have commercial insurance because they’re treated as limousines by law. But the company’s UberX business, which, like Lyft, has drivers use their personal cars, has different types of insurance depending on whether the car is being used for personal purposes (covered by the driver’s own insurance), the driver is hunting for fares (a combination of personal insurance and a contingent liability that covers up to $50,000 per person injured and $100,000 per accident in cases of bodily injury), or the driver is traveling with a passenger (up to $1 million in excess liability coverage, plus up to $50,000 in contingent collision coverage). The two companies expanded their insurance offerings earlier this year after a high-profile accident, but the insurance they’re providing is “nonprimary,” meaning the personal insurance is the preferred form in the case of an accident.

Where insurance associations stand: Uber and Lyft drivers with the wrong insurance coverage are endangering both themselves and their passengers, industry groups say. In comments to the Buffalo City Council last week [PDF], Kristina Baldwin of the Property Casualty Insurers Association of America noted that personal auto insurance generally doesn’t cover taxi-style ride service and argued that drivers should have a more comprehensive form of insurance “that is primary and ideally applies on a 24/7 basis.” Baldwin described the current tiered system of insurance as “a source of confusion for drivers and passengers,” who are either mistaken about what their personal insurance policy covers or “are simply hoping for the best.” She added, “This confusion is likely to result in costly coverage disputes and delayed compensation to accident victims.”

A showdown in California: A bill in the California Legislature would restructure insurance requirements for transportation network companies. Assembly Bill 2293 would require drivers to carry $1 million worth of insurance coverage at all times. (A second measure, Assembly Bill 612, would require drivers to undergo drug and alcohol tests, background checks, and fingerprinting.) Uber and Lyft oppose the bills, but groups representing the insurance and taxi industries back them, saying the measures would limit risks and improve safety.

In comments to Fast Company, Lyft spokeswoman Paige Thelen said the two bills had changed significantly from their initial versions and there is “no clear consensus” on the insurance issue.

Still, she emphasized that there was room for compromise. “We are continuing to work with legislators to ensure that consumers, drivers, and passengers have the ability to access safe rides from the Lyft community,” she said.

(photo by SPUR/Flickr)