The Sharing Economy and Auto Insurance

Carpoolers and hitchhikers were the original ridesharers. Now, ridesharing has become much more sophisticated. Riders and drivers can now be partnered through smartphone applications, which is changing how we think about insurance and liability. The promise of the sharing economy, people making money from things they already own, is a noble one. Especially during tough economic times such as the 2008 recession, flexible job options in the sharing economy provide many with a financial safety net. But what do these new collaborative marketplaces, particularly ridesharing ones, mean for traditional insurance carriers? This is a great question, and one I hope to help unpack here. The Rise of the Sharing Economy People were tired of waiting long periods for unreliable taxis and poorly run public transportation. The idea of ridesharing quickly caught on and has grown steadily ever since. There's a reason why ridesharing giant Uber has been valued at more than $60 billion; it's serving a significant customer demand. And whether we like it or not, sharing economy companies like Uber are here to stay. See also: 9 Impressive Facts on Sharing Economy   Although sharing economy platforms have caught on quickly, laws and regulations have been sorely lagging. Many sharing economy companies currently operate in the legal and regulatory vacuum as decision-makers try to figure out how to handle this new form of economic exchange. The Growing Acceptance of Ride-Sharing The insurance industry is in a different stage of acceptance, however. Recently, we have seen a growing acceptance by insurance carriers of the ride-sharing phenomenon through the development of innovative policies and products. Why is ridesharing so popular? Convenience. Instead of having to pick a taxi company, calling them and waiting an untold amount of time, ride-sharers can now log into a smartphone app to book a ride. Once a driver accepts, you can see in real-time where your driver is, and even communicate with him. An advantage of ridesharing is that you don't have to exchange cash or card information for payment. Most ridesharing apps allow you to prepay into an account and simply deduct the amount of the ride from that account. Or, even connect your credit card to your account for a seamless transaction. And insurance carriers are catching on. For instance, Aviva, State Farm, GEICO, Intact and others, have introduced hybrid rideshare specific policies for those who want to drive for Uber or Lyft. But there are other aspects of auto insurance coverage that relate to the sharing economy: car-sharing. The Growing Acknowledgment of Car-Sharing For car-sharing, instead of sharing rides, users share the use of their personal vehicles in much the same way as a car rental agency operates. The biggest car-sharing platform is Turo, which allows people to rent out their vehicle to screened drivers for a fee. Think of it as a car rental agency, but on the individual level. Both car and ridesharing platforms have built-in insurance, but many questions have been raised as to liability in a sharing world. The Issue of Insurance Coverage There are certain stages of engagement in sharing economy work like ridesharing. When you are matched with a passenger, pick her up and drive her somewhere, there is no doubt you are "working." What about when you are waiting for a passenger? Or driving around looking for one? Are you covered then? And which coverage counts, yours or the platform's? But for the most part, these issues have been settled through innovative gap coverage and hybrid policies. A problem arises, however, in the form of insurer knowledge. Many sharing economy workers don't realize that they're not covered under traditional auto insurance policies. By definition, paying for the use of a vehicle, whether it's an Uber ride or renting someone else's car, is a commercial transaction. See also: Why to Embrace the Sharing Economy   That means that private insurance won't cover you for accidents or incidents involving the vehicle in question if the vehicle is being used for commercial sharing. That can be a rude awakening. Educating ride-sharers must be priority number one for sharing economy platforms and insurance carriers. Unfortunately, the law hasn't caught up to the sharing economy. In many jurisdictions for instance, ridesharing is still illegal even if you have the right insurance coverage. That is changing, however, as municipalities ease restrictions and slowly change laws to get with the times. Remember, the sharing economy is here to stay, and we must get on board, safely of course. The insurance industry is ahead of the curve, and will be much better once municipal, state and federal decision-makers better understand and intelligently regulate this new form of economic exchange.