Summoning a driver at a push of a smartphone button is a lot easier than trying to hail a cab during rush hour, which may explain why Uber, a car service app that connects passengers and car services within minutes, has become so popular.
The San Francisco-based startup, which launched in 2010, is the biggest of the car-hailing apps (others include Lyft, Sidecar and Wingz), operating in 120 cities and 37 countries. Uber relies on a surge-pricing model, which means the fares increase during high-demand periods. The company has come under fire from traditional taxi drivers who say the service is not fair and might even be illegal. This battle between upstart and establishment is likely to continue, and may benefit riders from a cost perspective.
Meantime, here’s what you need to know about Uber:
- How Does Uber Work?
A customer requests a car using a smartphone app and Uber sends its closest driver to their location, using the phone’s GPS. The fare is charged directly to your credit card. Uber provides five types of services: UberX, the cheapest option which allows for the hiring of livery car drivers with a smartphone; Uber Taxi, which lets you e-hail a yellow cab; Uber Black, a private hire car; Uber SUV, the car seats up to six people and Uber Lux, which features the priciest cars.
- Who Drives Uber Cars?
UberX drivers are not licensed chauffeurs and they use their own cars. They also use their personal auto insurance policy while driving for Uber and they are not required to get commercial liability insurance. According to the company website, all ride-sharing and livery drivers are thoroughly screened and the company conducts ongoing reviews of drivers’ motor vehicle records throughout their time with Uber.
The review process may be flawed. A three-month investigation by NBC4's I-Team found that convicted felons passed Uber background checks across the country. And in an undercover investigation, NBC Chicago hired several UberX drivers and ran their own background checks on them and found numerous tickets for speeding, illegal stops and running lights.
- Is Uber Safe?
States are warning riders who hail an Uber or another ride-sharing cab that they may not be covered by insurance if the driver gets in an accident. But Uber and other ride-sharing companies say that is not the case.
"There's no insurance gap at all on any trip on the Uber system," Uber spokeswoman Nairi Hourdajian told NBC News. She said the company's $1 million policy provides sufficient coverage in case a driver's personal insurance fails to do that.
There are other safery concerns as well. A 32-year-old Uber driver in Los Angeles was arrested in June on suspicion of kidnapping a woman and taking her to a motel room, police said.
And a California couples told NBC4 an Uber driver stole $2,500 in cash and personal items from them after he picked them up from LAX and dropped them off at their West Hollywood condo.
- How Much Is Uber Worth?
Uber was valued in June at $18.2 billion, less than a year after being valued at $3.5 billion. The valuation was the highest-ever for a venture-backed start-up and experts say Uber is positioned to become one of the most powerful companies in the world.
- Uber Capping Fares in Emergencies
Uber announced Monday that it will cap fares during emergencies and disasters in all U.S. cities. The company said prices may still rise higher than usual during an emergency, but the increase will be limited. The price will always stay below that of the three highest-priced, non-emergency days of the preceding 2 months, according to Uber's website.
The company was accused of price gouging when it applied surge pricing after Hurricane Sandy, in some cases doubling the normal fares.
- Uber Slashing Fares in Some Cities
Uber also said Monday that it was temporarily cutting UberX rates by 20 percent in New York City, making its service cheaper than taking a yellow taxi.
An UberX ride from New York’s City’s Grand Central Terminal to the Financial District will now cost about $22, down from about $28. The same ride in a city cab will cost about $24, according to Uber’s blog.
Uber has also reduced fares in Atlanta, San Francisco, Boston and Chicago.
- Uber Banned in Some Cities
While taxi operators often shell out more than $1 million for a medallion to operate in some cities, Uber drivers don’t. At least six cities (Omaha and Lincoln, Nebraska; Ann Arbor, Michigan; San Antonio and Austin, Texas; and Miami) as well as the state of Virginia have banned ride-sharing companies. Another seven cities and three states (California, Connecticut and Pennsylvania) are trying to regulate them.