Lyft hikes service fee for rides as insurance costs rise

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By Nivedita Balu

(Reuters) - Lyft Inc (NASDAQ:LYFT) is increasing the service fee its U.S. riders pay directly to the company to cover higher insurance costs, the ride-hailing firm said.

The increase averages less than 50 cents per trip nationally, a Lyft spokesperson said. The company pays for drivers' insurance when they are working on its platform.

"Lyft is facing insurance inflation pressures and we've nominally increased service fees to help offset these costs," the spokesperson said in an emailed statement.

New data from YipitData showed Lyft increased its published service fee for rides in virtually all U.S. markets in the first week of October, including around 150 markets expect for New York.

The service fee went up by an average of about 60 cents, implying a 3% increase in the cost of an average ride, and an 18% increase in the service fee, according to YipitData.

Graphic: Lyft's service fee spikes in October - https://graphics.reuters.com/LYFT-FARES/akvezdkkrpr/chart.png

The service fee, which goes directly to Lyft, is an additional fee added on a per-ride basis that covers certain operating costs and safety measures such as insurance and background checks.

Lyft added a 55-cent surcharge earlier this year that went directly to the driver to help drivers deal with the higher gas prices that have been eating into their earnings. The program was stopped in late September.

Lyft now offers up to 7% cash back when drivers pay for gas with Lyft Direct debit card.

"The price the consumer pays shouldn't change very much on the basis of these two changes, but it might change the amount Lyft takes as revenue versus the amount the driver takes," YipitData analysts said.

"Since the fuel surcharge went directly to drivers and the service fee goes directly to Lyft, it suggests that Lyft would take more of each fare, assuming no changes to the other fare components."