Minnesota's top insurance regulator is warning Minneapolis about "unacceptable" gaps in insurance for newcomer transportation companies that allow people to essentially become chauffeurs of their personal vehicles.

Minneapolis enlisted the help of Tim Vande Hey, deputy commissioner for insurance in the Minnesota Department of Commerce, as it crafts new regulations governing services like Lyft and UberX.

Those services are currently operating illegally in Minneapolis since city regulators say they must be licensed as taxicabs under existing ordinances.

"There are significant gaps in insurance for both the drivers, passengers" using the companies, as well as pedestrians, Vande Hey said in a letter to the city after studying the UberX policy.

In a separate consumer alert, the department said users should carefully check both their personal policies and those held by services like Lyft and UberX.

"Finding out after-the-fact that you have gaps in coverage can mean serious financial devastation," Commerce Commissioner Mike Rothman said in the alert. "Take steps now, ahead of time, to ensure you have the coverage you need."

At issue is how the UberX commercial insurance, provided by James River Insurance Co., interacts with personal policies held by the drivers. Uber, the company offering the UberX services, has said the policy supplements a driver's personal auto insurance and can also become primary insurance if the personal insurance does not apply.

But Vande Hey noted that commercial auto insurance was not intended to be supplemental to an existing personal auto policy.

Kenny Tsai, UberX's general manager in the Minneapolis market, said his company has requested a meeting with the Commerce Department to discuss its review of the insurance program. He said UberX's coverage meets and exceeds Minnesota standards, and there is additional coverage that the department did not review.

"The coverage is excess to the driver's own policy, but it acts as primary insurance if the driver's policy is not available for any reason, covering from the first dollar," Tsai said.

UberX and Lyft, which rely solely on smartphone apps, have raised the ire of the taxi industry, which complains the city is setting up a two-tier regulation system that is more burdensome on taxicabs. In response, council members are considering methods of simultaneously relaxing some taxi ordinances.

UberX is distinct from Uber's other offerings, Uber Black and Uber SUV. The latter services use licensed limousine drivers and are subject to different regulations.

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