Canadian Underwriter

Growing popularity of car sharing likely to require changes in current policy wordings

March 18, 2014   by Angela Stelmakowich, Editor

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The increase in car sharing – which some vehicle owners view as an opportunity to rent or lend their vehicles when not in use – will likely necessitate changing current policy wordings at some point, Ron Burns, vice president of Guarantee Superior at The Guarantee Company of North America, suggested Monday during a technology conference in downtown Toronto.

Peer-to-peer car sharing is when the owner of a personal vehicle lends or rents that vehicle to someone else, Burns noted during the 12th Annual P&C Insurance Technology Conference. “We, as insurers, don’t like if you start lending your vehicle to other people for money,” he told delegates.

Policies – which are close to the same in most jurisdictions – contain exclusions to deny coverage if a person driving a lent or rented vehicle has an accident while driving, Burns explained. “So 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,” he said.

Burns pointed out some people may not be using their own vehicles 90% of the time. “They can see this as an opportunity to actually generate some income to actually pay for the vehicle. So we’re going to see some changes to insurance, some of which will be hard to take because some insurers will stand up and say there’s no coverage.”

It is an issue that will need to be addressed in light of the increasing popularity of peer-to-peer, virtual and commercial car sharing.

“Right now, we have over 100,000 Canadians who are members of car-sharing clubs, and around the world, this is sprouting very, very quickly,” said Catharine Kargas, vice president of the Montreal-based consulting firm MARCON.

In Europe, for example, businesses are moving increasingly to shared fleet environments as opposed to having specific employees being allocated individual vehicles, Kargas reported. Europe now has about 2,000 of these vehicles, she told attendees, adding that organizations that have moved to the model have decreased transportation costs between 25% and 40%.

Pointing to France – which has had car sharing in place for many years – “what we’re seeing is that one shared vehicle is replacing approximately 20 individual vehicles,” Kargas noted.

“If you imagine a large fleet of those, how many vehicles are replaced,” Burns asked. For insurers, there will be a need to look at “what is now fleet insurance instead of personal insurance and that’s going to change the dynamic of how the product is sold,” he predicted.

Beyond car sharing is ride sharing, which also has insurance implications.

Kargas told conference attendees claims and settlements resulting from such accidents are certainly higher than the coverage being proposed. “So we have opportunities and issues that, sooner or later, Canadian insurers are going to have to deal with,” she said.

Ride sharing is not new, Burns said, but it has changed from cost sharing to revenue generating. “That’s really is where it becomes a little bit cloudy for insurers,” he said.

Should it get down to a claim, Burns said that he expects more and more insurers are going to start asking whether or not there was any ride-sharing process in place at the time of the accident. “At that time, you could see exclusions being used on the existing policy wordings today,” he cautioned.

“So, once again, do we have to be legislated to change that so we would be able to insure these people even though they are running a commercial operation? Or do we have to sell them a different policy, which gets back to a commercial policy or some sort of an excess policy or a base limit?”

“A million dollars is not going to go very far if you’ve got four people in the car,” Burns cautioned. “It’s just a matter of time before we see a car-sharing accident where there are serious injuries.” 

The CarSharing Association offers the following definitions:

  • car sharing — where a business owns and insures a fleet that is made available for consumers to drive (station-based or free-floating);
  • peer-to-peer (P2P) car sharing — where private car owners rent to private individuals with a P2P company acting as a broker and insurer;
  • ride sharing — where a driver picks up riders on a route that he or she is already planning to travel, and collects a fee from a rider that does not exceed his or her own expenses; and
  • alt-taxi — where drivers are making rider-directed trips for the purpose of earning income.

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