Question

Robert decides to start working for the local ridesharing company. He has a large 12-passenger van and thinks he will be in big demand at the airport. He tells his personal car insurance company that he is driving for a ridesharing company and needs some additional insurance. He is denied additional coverage. Why?

a) There is no such thing as ridesharing insurance.
b) He lives in a state that doesn't offer ridesharing insurance.
c) The city he lives in is too small for him to qualify for ridesharing insurance.
d) Many insurance companies will not insure high-occupancy vehicles under their ridesharing policies.

Answer 1

Robert is likely denied additional coverage because many insurance companies do not provide ridesharing insurance for high-occupancy vehicles, due to the risks associated with higher passenger capacity.

Step-by-step explanation:

Robert is denied additional insurance coverage for his ridesharing venture because many insurance companies will not insure high-occupancy vehicles under their ridesharing policies. This is part of the risk classification system insurance companies use to determine policy eligibility and premium rates. High-occupancy vehicles like 12-passenger vans may be considered more risky due to their size, potential for higher numbers of injuries in an accident, and increased liability. This situation illustrates the challenges in the insurance market, particularly concerning the problems of moral hazard and adverse selection that arise from categorizing individuals into risk groups based on imperfect information.