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Interesting that a disruptor is behaving like a legacy airline and tacking on fees rather than folding them into the price. What’s next, baggage fees?
UberX riders will now see a new line item on their receipt: a $1 “safe rides fee.”
San Francisco’s Uber said the fee demonstrates its “continued commitment to safety” and helps fund increased costs for background checks, motor vehicle checks, driver safety education, current and future safety features in its app, and insurance.
The on-demand ride service said the fee is being broken out for added transparency. “The safety efforts themselves (background checks, ongoing safety monitoring, driver safety education, insurance, etc) are not new,” spokesman Lane Kasselman said in an e-mail.
Rival ride company Lyft has charged a $1 per ride “trust and safety” fee since December, a spokeswoman said.
Insurance is undoubtedly the biggest safety-related expense for ride companies. UberX uses nonprofessional drivers in their own cars. As required by state regulators, it offers $1 million in liability insurance once drivers have booked a paid ride through the app.
Last month Uber and Lyft said they would also offer insurance coverage while drivers were in between rides. Those policies top out at $100,000.
However, the California Public Utilities Commission, which regulates the growing industry, is weighing whether the coverage in between rides should be $1 million. The state Department of Insurance and other parties have urged the PUC to increase the limits. That would mean additional expense for the companies.
Many riders complain about Uber’s surge pricing, which doubles or triples rates at times of high demand. Uber and other companies that engage in the practice said it helps bring out more drivers to meet increased need for their services.
Uber said it doesn’t think the fee will face the same backlash.
“We’re confident (riders will) understand and support the $1 safe rides fee,” Kasselman wrote.
Arun Sundararajan, a New York University business professor who studies the sharing economy, said he thinks riders won’t bristle as much when they face the new fee. “I’m sure some users will react unfavorably, but we’re used to variability and changes in prices from Uber, and I don’t think it will have a big long-term effect,” he said.
Even the controversy over surge pricing eventually will settle down, Sundararajan said. “It’s the same as the initial reaction to revenue management from the airlines, but now no one blinks an eye when they are charged a different price from the person sitting next to them on a flight,” he said.
(c)2014 the San Francisco Chronicle. Distributed by MCT Information Services,