What Implications From Car Sharing?

Although ride sharing and home sharing are the mainstays of the sharing economy, a new field is rapidly presenting challenges and opportunities. This is the rise of car sharing. Car sharing refers to an online marketplace where travelers can connect with a community of local car owners and rent any car they want, wherever they want it. Two Types of Car Sharing 1. Fleet car sharing This is where businesses such as car2go or communauto purchase and insure a large fleet of vehicles. These may be based in one location or free-floating. There are even companies that specialize in car sharing at airports. 2. Peer-to-peer (P2P) car sharing The second type of car sharing is where individual car owners rent their personal vehicles to private individuals. They do this using a peer-to-peer company that acts as a broker and insurer. Currently, two of the largest players in the peer-to-peer car sharing industry are Turo and GetAround. See also: What to Learn From Sharing Economy   How does it work? Once car owners have registered their cars with Turo (for instance), they can use an app on their smartphone to notify potential clients that their vehicle is available for hire at a set location and for a set period. For example, the owners can drive to work in the morning and park their cars; while they are at work, a renter can pick up a car to run a few errands and then return it before the end of the workday. Turo Offers Significant Benefits Based on U.S. statistics in 2015, Turo anticipates that Canadian drivers can expect to earn approximately CAN$500 per month. Of course, individual earnings will vary depending on the value of the vehicle and how often it is available. In the U.S., one authority claims that car sharers can earn anywhere between $600 and $1000 a month, depending on the type of car. Might not get much for this: But this: Oh, baby! Turo also offers insurance packages for its participants. According to its website, Turo provides “protection against physical damage up to its actual cash value, for collision and most 'comprehensive' causes, including theft.” Turo also promises that participants will be covered by $1 million in liability insurance. The Love-Love-Love Relationship of Car Sharing Car Owners Love It This marketplace allows car owners to earn extra money to help offset the cost of owning a vehicle. And because technology has made it possible to connect people with little or no advance notice, we are seeing a growing number of car owners capitalizing on the trend and using their vehicles to generate extra income. Consumers Love It Consumers without cars also love car sharing. Whether they live locally or are traveling for business or pleasure, car-sharing is an attractive option because it’s a great alternative to typical rental companies. In some cases, it even allows people to forgo car ownership altogether because they can simply rent a vehicle whenever they need it. Pete Moraga, the spokesperson for the Insurance Information Network of California, says, “You’re seeing it primarily in college cities because it works very well for a college campus where students just need cars to do errands and not for the full day." Further, recent research found that car sharing services are now available in more than 33 countries and account for almost 5 million users. Not bad... and the growth continues. See also: The Sharing Economy and Accountability Environmentalists Love It Those who care deeply about our environment love car sharing because it means fewer vehicles on the road, less money invested in non-renewable resources and a reduction in the carbon footprint on the environment. Unique Challenges for Insurers So what does this mean for the insurance industry? A lot. Not surprisingly, car insurance companies haven’t quite fallen in love with this new world of car sharing as they are finding that it poses some interesting challenges. Here are several problems that could affect basic coverage for clients:

1. LIVERY - Will clients' personal policies cover their cars if they rent out their vehicles? Most P2P companies understand the need for commercial auto insurance, but it’s always best to confirm that the coverage is adequate.
2. WHO IS DRIVING? Vehicles that are involved in car sharing are exposed to a greater risk of accidents because they are being driven by drivers who are unfamiliar with the vehicles. Add bad weather and heavy traffic, and owners are putting their vehicles at serious risk. The concern for insurers is whether the client’s premiums are accurately reflecting the increased risk involved.
3. LIABILITY – This is one of the most significant issues for personal auto insurers. Who pays if the car is involved in an accident while participating in car-sharing? Some car-sharing companies are facing this challenge by offering primary coverage in the event of an accident; some are offering comprehensive and collision coverage; and some are even offering third-party liability coverage.
4. TRANSITION – Who is going to pay for damages if there is a dispute about when an accident happened? Did it happen when the owner was using it, or when the renter was? To help alleviate the confusion, some P2P companies are developing data recorders and phone apps to track mileage, time and who is driving the vehicle.
5. DEPRECIATION – Who will cover the cost of depreciation if a car-sharing driver wrecks a vehicle? Will it be the P2P company’s insurance plan or the car owner’s?
6. EXCLUSIONS – Most insurance policies contain exclusions that will deny coverage if a person has an accident while driving a lent or rented vehicle.

Some of these questions have simple answers, but many will not. Ron Burns, vice president at Guarantee Company of North America, said this concerning this issue, “Unless we have some changes in the actual policy wordings, there are going to be a lot of insurers who stand up and say we won’t pay for that loss.” Intact Offers Insurance to Car Sharers In response to these concerns, Turo has partnered with Intact to offer commercial auto insurance specifically for car owners who are participating in car sharing. How does it work? While the vehicle is being delivered to the renter and during the rental period, the vehicle is covered by Turo’s commercial insurance. When the vehicle is not being delivered or rented, the owner is protected as usual under her Intact personal auto insurance policy. All car owners who are planning to participate in peer-to-peer car rental through a company such as Turo MUST inform their insurance broker to ensure that their coverage is sufficient and accurate. Does Turo Insurance Replace Personal Auto Insurance? No. Car owners need to make sure that they have personal auto insurance, as well. In fact, to even list their car on the Turo marketplace, they need to investigate insurance plans with any of the following carriers:

• Intact Insurance
• Belairdirect
• Capitale General Insurance

Do Car Sharers Need Separate Insurance Plans? Yes. The Turo insurance card does not satisfy state or provincial "financial responsibility" requirements and cannot be used to register a personal vehicle. Do Insurance Providers Need to Change Their Strategy? Yes. With more car sharing startups entering the marketplace, and the relative ease with which savvy car owners can use their assets to generate income, it is clear that the sharing economy is poised for significant growth. See also: Sharing Economy: The Concept of Trust   Insurance carriers need to ask themselves some honest questions as they boldly face this new customer climate:

• How can we adequately face the new challenges in this sharing economy?
• Should we create a unique policy just for car sharers?
• Should we offer them a commercial policy, an excess policy or a base limit?
• How can we stay innovative and capture the changing marketplace?

At a minimum, insurance carriers have a responsibility to engage with and educate policy-holders on many of the issues associated with car sharing. Car sharing may not be the biggest concern in the minds of insurance carriers, but it should at least be on their radar.