Two years ago, Uber faced a problem that could have been financially ruinous. Sure, the ride-hailing company has fought with regulators and incumbents over virtually everything — from the way it classifies drivers to the amount it charges for rides — but this problem was particularly big: Insurance companies didn't want to cover its drivers.
Waging this fight would require mighty powers of persuasion and even the ability to help create a new type of auto insurance. To do it, Uber hired a young executive with exactly zero experience in the insurance business.
Gus Fuldner, Uber's 33-year-old head of insurance, doesn't look or act like the archetype of the Silicon Valley disruptor. He's no Travis Kalanick, Uber's pugnacious, outspoken CEO. In square-toed shoes, with a stooped posture, and blond hair parted down the middle, Fuldner comes off more like a junior economics professor. His idea of fun is obsessing over Bitcoin, credit card networks, or the ownership structure of the Green Bay Packers — all topics he has discussed in his more than 200 answers on the question-and-answer site Quora.
Fuldner's style was on display in early 2015, when in little-noticed testimony before a government commission in South Carolina, he challenged a longtime insurance lawyer on a technical point. The totality of Fuldner's insurance experience at that time was one year at a startup that many insurers viewed with suspicion. The lawyer, Thom Salane, several decades Fuldner's senior, noted that he had been representing insurance companies for 35 years.
With all the restraint of a graduate student who has just devoured every book on a particular topic, Fuldner said the lawyer didn't know what he was talking about.
"Mr. Salane’s reference to an 'aggregate limit' suggests he is confusing an auto liability policy with a general liability policy, which covers non-auto risks such as slips and falls in an office," Fuldner said. "General liability insurance generally contains an aggregate limit, but auto insurance does not."
Setting aside the particulars of this argument — Salane, in an email to BuzzFeed News, said Fuldner's comment was "technically correct but essentially missed the point" — the exchange showed a methodical strategy that Fuldner would deploy countless times in 2014 and early 2015, in a quest to legitimize the weird and potentially risky new business of letting everyday people charge strangers for rides in their cars. His lobbying efforts led major insurance companies to drop their animosity toward Uber and, in many cases, offer new insurance options that catered to Uber drivers. Statehouses around the country have since enshrined Uber's preferred insurance model in laws defining the rules for the nascent on-demand car industry.
"Had Gus not singlehandedly gone around the country, Uber would potentially be out of business. I mean, the regulatory landscape would be vastly different," said Andrew Boron, the former director of the Illinois Department of Insurance. "Gus engaged. He was all over the place, talking to everybody."
Auto insurance may not be the flashiest issue Uber has ever encountered, but it posed a major challenge for the company and its rivals. The non-professional, part-time drivers powering its popular UberX service in most cities — not quite taxi or limo drivers, and not quite personal-use drivers, either — defied categorization by insurers. Feeling that drivers were abusing their personal insurance policies by carrying fares, some insurance companies would simply cancel those policies. Many in the insurance world, like Salane, argued that Uber or its drivers should buy taxi-like commercial insurance — policies that would be prohibitively expensive given UberX's low rates.
The problem centered on a curious window of time known as "period 1." Drivers enter period 1 when they turn on the Uber app, searching for fares, and they leave it when the app connects them with a passenger — at which point Uber's own insurance policy kicks in. What made period 1 so radioactive was that it was a type of commercial activity that personal auto insurers hadn't previously considered (there's no "period 1" when you hail a taxi or call a limo). Personal insurance contracts expressly excluded coverage if drivers were to "carry persons or property" for money, but the contracts had no clauses excluding period 1.
Uber, for its part, was reluctant to extend its own insurance policy to cover period 1, even though drivers were ostensibly working for Uber during that time. The company says it feared that drivers might abuse the coverage by keeping the app on without any intention of picking anyone up, or by turning the app on after getting into an accident.
Even as this dispute simmered, Uber continued to expand its UberX service, alarming insurance companies, which take a conservative approach to new risks. To an insurer, a taxi, which is driven around the clock, is a much bigger risk than a personal car, which might be driven a couple hours a day. An UberX car looked terrifyingly like a taxi-level risk, paying personal-level insurance premiums.
"Our policies were never designed to handle ridesharing activity because the industry didn't exist," said Mariel Devesa, the head of innovation at Farmers Insurance. "Whenever you have a new technology and a new industry that comes up, the first response is to be protective."
Into this mess came Fuldner, a Stanford MBA who had studied economics and computer science at Yale. Though he had never worked in insurance, he had a tolerance for fine print and a knack for deciphering structured language. Insurance regulations are a patchwork, with different laws in different states, and insurance contracts are full of technical jargon. Fuldner started reading.
"He has this tremendous ability to grab a 35-page document, consume it very, very quickly, and then retain the majority of the knowledge out of it," said Bill Gurley, an Uber board member and a partner at the venture capital firm Benchmark, which was an early investor in Uber. "The ability to synthesize vast amounts of information — in this case, 50 states and all the data that you need — that's something that's very hard for one human to be able to do. There's too many variables, too many permutations, too many things to hold in your brain at one point in time. I've never met anyone on that dimension that's stronger than Gus, in my life."
Fuldner had been hired by Benchmark in 2011, out of Stanford's business school, and was tasked with searching for investments in consumer internet and financial technology companies. His specialty was payments, having worked on financial services projects at McKinsey & Company after college. As a teenager in Milwaukee, Fuldner started a one-man computer consulting business, and he was part of a team that won the national Fed Challenge high school economics contest (the prize included a scholarship and a Federal Reserve messenger bag). At Yale, he was among the first employees of Higher One, an education finance startup that is now traded on the New York Stock Exchange.
Fuldner's initial work for Uber, while still at Benchmark, was to help the company with payments in France, he says. He started spending more time at the Benchmark portfolio company, until being hired in late 2013 to run insurance.
"It was, in Travis's mind, 'Oh, insurance is financial services,'" Fuldner told BuzzFeed News, referring to the Uber CEO. "In reality, there's not a huge connection between the two. It's not really the same companies or the same regulators. But I got the connection."
"One of the advantages of playing in the insurance space is that the product is the contract," Fuldner continued. "An insurance company sells a contract, and everything about that product should be written in that contract."
While Uber has become infamous for bending local rules, Fuldner became a living, breathing rulebook, able to cite obscure insurance provisions and explain how they worked. In emotionally charged debates, even some of Fuldner's opponents appreciated his measured approach.
"Insurance is so complicated that, within 30 seconds, if you're talking to an elected official, their eyes glaze over," said Boron, the former Illinois insurance regulator, who was subjected to Fuldner's persuasive powers. "He was able to, in a clear, concise, interesting way, explain the issue."
Fuldner and his team crisscrossed the country on a campaign to win over lawmakers and insurers. They traveled so much that Fuldner memorized airline flight patterns and booking rules, allowing him to string together flights in unexpected ways to make last-minute meetings. By observing flight attendants, he even figured out how to fix United Airlines' in-flight wifi — making him the techie equivalent of the doctor on board who rings his call button to help a passenger.
"Gus studied what they would do to fix it," said Curtis Scott, the senior insurance lawyer at Uber, who traveled with Fuldner last year as United rolled out a new wifi system that was prone to breakdowns. "On flights where the wifi was broken, he would ask the flight attendant to come over, and then nicely explain a process that they could do to get the wifi to work." (The trick, essentially, was to shut the system down and turn it on again.)
Colorado was the first state to pass a law to regulate Uber and its rivals; today, 29 states, including California, Illinois, and Texas, as well as the District of Columbia, have passed similar legislation. Among insurance companies, 11 now offer some form of insurance for UberX drivers; in the beginning of 2015, none did. The detente was capped by a remarkable press release in March 2015, from Uber and a collection of insurance companies, which had teamed up to persuade politicians to turn their compromise into law.
The solution they came up with is a little convoluted and, perhaps unsurprisingly, seems to benefit Uber and the insurance companies while requiring drivers to pay up for full coverage.
Under the compromise, period 1 — that tricky stretch when drivers have the app on, searching for fares — officially became a thing in the insurance world. Uber agreed to let auto insurers exclude coverage for personal-use drivers during period 1; a number of insurance companies actually rewrote their contracts to reflect this. Excluding period 1 from normal insurance policies had the somewhat counterintuitive effect of allowing UberX drivers to keep using those policies.
But it also meant drivers' policies wouldn't cover them during that period. Uber, during period 1, provides drivers with liability coverage with relatively low limits, and it doesn't provide any protection for the driver's car. (The insurance that kicks in when drivers accept a fare, which Uber buys from the specialty insurer James River, is much richer, with up to $1 million in liability coverage.)
This is where the new insurance products come in. In California and other states, for example, Farmers Insurance now sells drivers a "ridesharing" add-on to extend their normal insurance policies into period 1. Such options cost extra — the Farmers add-on in California charges premiums that are 8% higher than normal — creating an additional burden for drivers.
Harry Campbell, the creator of the Rideshare Guy blog and podcast, said he felt it wasn't fair that Uber didn't provide collision coverage to protect a driver's car during period 1.
"For a company like Uber, I think in certain situations they should be going above and beyond what's legally required," he said.
Fuldner, for his part, is now helping Uber expand overseas, with a particular focus on China, a huge but troublesome market. He spent three years in Hong Kong while at McKinsey and can speak limited Mandarin, he said. Last year, he negotiated a deal with China Taiping, a Chinese state-owned insurance company, to provide insurance for Uber passengers there.
Uber's challenges in China are much bigger than insurance: Its business is threatened by a powerful Chinese rival and, according to media reports, has recorded sizable losses. Fuldner, too, faces a steep learning curve in China, though he doesn't seem to be bothered by that reality. For international work, he said, he tends to ask local law firms or insurance brokers for help understanding the rules.
Besides, this wouldn't be the first time he's learned his job on the fly. Kate Sampson, the former head of insurance at Lyft, Uber's only real American rival, said Fuldner's lack of insurance experience in this country turned out to be an asset.
"I wouldn't call Gus naive, but I would say not having that insurance background really helped," said Sampson, who is now the head of the San Francisco office of Marsh, an insurance broker. "Not coming from insurance, he has no preconceived notions about what an insurance company might do or not do."