Lyft increases service fees for riders amid rising insurance costs

Lyft is increasing the service fees its riders in the U.S. pay for each ride. The rise in cost, which will go directly to Lyft, aims to cover the higher costs of insurance, reports Reuters.

Lyft’s service fees pay for overhead costs like driver insurance and security background checks. The company expected a rise in insurance costs to affect Q3 margins, according to Lyft’s Q2 earnings call, which is one of the reasons it lowered full-year guidance. At the time, Lyft hinted at changing its pricing structure to accommodate the insurance price hike — the company really needs to increase its per-rider revenue, which actually decreased from Q4 2021 to Q1 2022, and remained flat from Q1 to Q2 despite a slight rise in active riders.

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But will this service fee increase be enough to help Lyft inch closer to traditional profitability, or will it only help offset the costs of rising insurance? Or worse, will the slight price increases send would-be Lyft riders into Uber’s cushioned seats? Uber told TechCrunch that it has not increased its service fees, and according to data from YipitData, Uber’s service fee has stayed at $2.87 since 2020.

“The rising cost of services like auto repair and healthcare have impacted the commercial auto industry and contributed to increasing insurance costs across the globe. We expected this insurance inflationary pressure, as discussed on our Q2 earnings call, and have nominally increased service fees to help offset these costs,” according to a Lyft statement shared with TechCrunch.

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The spokesperson said the increase averages less than $0.50 per trip nationally, but YipitData’s numbers showed the service fee went up by an average of about $0.60, or an 18% increase, which implies a 3% increase in the cost of an average ride.

The data also showed Lyft increased its service fee for riders in almost all 150 U.S. markets, except New York, in the first week of October.

In San Francisco, Lyft’s service fee on a standard ride increased from $3.00 in January to $3.60 this week, according to data from web archiver Wayback Machine. For Lyft XL and Lux, the service fee increased from $2.75 to $3.35, and for Lux Black and Lux Black XL, it went from $2.05 to $2.65.

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In March, Lyft added a $0.55 surcharge that went directly to drivers to help cover the rising cost of fuel, which has since been dropped. Uber issued a similar surcharge at the time.

While it shouldn’t affect riders too much, the current price hike might mean that Lyft takes a larger share of each fare in proportion to Lyft drivers, YipitData analysts said, according to Reuters.

This article has been updated with a statement from Lyft.