(Reuters) - A Bermuda-based insurer that recently severed ties with an Uber Technologies Inc affiliate said on Thursday the risk of providing driver ride-hailing coverage had become too great and that it had mispriced policies during its initial years on the account.
James River Group Holdings Ltd said on Oct. 8 it would cut ties with a unit of Uber, its largest client, cancel all related policies as of Dec. 31 this year, and boost its reserves by $55 million to $60 million, mostly related to its commercial auto line with its specialty lines segment for 2016 and 2017.
Insurance is one of the largest expenses for rideshare companies, an issue that many analysts cite as a risk for the rideshare industry’s profitability.
“In Uber, we wrote a new type of risk that originally seemed to be highly profitable,” said J. Adam Abram, James River executive chairman and chief executive officer, in a call with analysts on Thursday to discuss its third-quarter results.
But the nature of that risk changed as Uber rapidly expanded and moved into other types of ride-hailing business lines, Abram said. Uber’s newer businesses include food delivery and freight.
James River negotiated a “substantial pricing increase” with Uber in response to the insurer’s poor results for the business in 2016 and 2017, Abram said.
Florida was an “outsized contributor” to the companies problems with Uber, given a large number of uninsured and underinsured motorists, James River said.
James River is presently handling more than 18,000 Uber-related claims, Abram said.
Reporting by Suzanne Barlyn; Editing