FS101: Minimum On-Demand Delivery Insurance Requirements

Update: We’ve released a new whitepaper examining the Sharing Economy industry. We dive into the insurance landscape, legal climate and how to approach risk management for companies in this sector. You can download the report here!

Basic risk management tips for on-demand delivery companies

We work with no shortage of on-demand companies operating in the ride share, car share, or delivery space.  Think companies like Uber, Postmates, Seamless, and countless others. These startups have a very acute pain point when it comes to getting auto insurance because they need a very specific brand of auto insurance called hired / non-owned auto HNOA insurance.  HNOA insures companies for liability arising from the operation of vehicles that are not actually owned by the company, but used for company business.  On-demand companies are in a particularly sticky situation when it comes to getting HNOA because they have an army of independent contractors operating the non-owned vehicles.  As you might imagine, that’s a huge headache for underwriters. There is a lot of risk involved.

While this post won’t talk about the actual process of getting HNOA for your on-demand company (you can read about that here), it will talk about how to set up your company to secure HNOA coverage when you’re ready.

To be clear, this area is never black and white and many factors go into underwriting these policies.  However, we have plenty of data points from negotiating the underwriting dozens of them, so we know you’ll be setting yourself up for success if you follow these minimum on-demand delivery insurance requirements when ramping up your company:

Hiring Drivers

• Establish a process to review each driver’s driving record at the time of hiring and at least every 6 months after onboarding.  This information should be kept on file for the 3 years prior as new records are checked.

• Disqualify drivers from the platform if they don’t have a valid driver’s license and insurance ID card

• Disqualify drivers if they have any of the following “smudges” on their driving records
  • No more than two moving violations in 36 months and one at-fault accident
  • Driving Under the Influence
  • Driving While Impaired
  • Driving in Possession of Alcohol or Drugs
  • Refusal to submit to a blood, urine, or breath test
  • Driving with a suspended or revoked license
  • A Felony in which a vehicle is used (i.e., Vehicular Manslaughter, Vehicular Homicide, Vehicular Assault, Hit and Run, eluding a police officer.)
  • Reckless Driving
  • Driving 25 or more mph over the speed limit; Speed Contest; Racing.

• Age & Experience
  • Drivers must be 18+ years old with 2+ years of driving experience.
  • If delivering alcohol of any kind, drivers must be 21+ with 2+ years of driving experience.
  • Your company must check the driver’s proof of personal insurance every 3 months for a minimum of 2 years if If the driver has violations for driving without current registration / license / insurance documents.

Vehicles & Operation

• Must meet all state safety requirements
• No random passengers allowed!  Drivers can only drive the goods / food they’re getting paid to deliver.
• If a driver gets a major citation after employment starts, he/she must be suspended until the charges are dismissed or the situation is otherwise resolved in favor of the driver.  If they can’t beat it, they’re off the company’s list of drivers for good.

Miscellaneous / Final Notes

• Carriers will decline to quote if you specify a maximum delivery time…the logic is that this encourages more reckless behavior from delivery personnel, leading to more accidents, injuries, and claims.
• Keep accurate records!  Insurance policies like these are “audited” at the end of the year, and you’ll need to be able to accurately show your delivery receipts.

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