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Car-Sharing: Competition for Auto Insurance Agents?

As you drive through a big city, you probably notice scattered throughout the city small cars covered in advertisements, promoting that they are part of a car sharing program. They’re parked on streets or city lots, and advertise that you can rent them for the day or several, depending on your needs.

Car sharing programs were developed in Europe several decades ago and are still going strong. With the popularity we’ve already seen in large cities across the United States, there’s a good chance the programs are here to last. What this will mean for auto insurance agents remains to be seen.

CruxialCIO reports there were 24 car sharing programs in the United States last year, with another 1 million Americans enrolled in peer-to-peer sharing programs. These programs are designed to provide Americans with temporary access to a car when needed. The benefit for those who don’t use vehicles on a daily basis is that they won’t need to purchase a car. Another goal of the program is to increase the use of public transportation opportunities, which could help cut down on the amount of greenhouse gases emitted in an urban setting.

Impact for Auto Insurance Agents

What this means for insurance agents is still undecided. Car share programs like Zipcar don’t require drivers to carry an auto insurance policy. Instead, the company carries an umbrella coverage policy, which members pay for in their monthly fees. Most of these programs require a membership. For example, with Zipcar, members are charged a monthly fee and can reserve a vehicle a number of times each month. Each reservation includes a restricted number of miles and insurance. Insurance includes liability coverage and personal injury protection. In addition, Zipcar, which is owned by Avis, advertises that individuals with any personal insurance coverage who are involved in a crash in one of the company’s cars will have their personal insurance apply first, before the company insurance applies.

Other car share companies include City Car Share, which is available in the San Francisco area. Car2Go and several rental car companies like Enterprise, and Hertz are also jumping in with their own programs.

Then there are the peer-to-peer programs like UberX, which have been under legal attack in some states for operating as taxi services without a license, according to a New York Times report last year. These legal cases are ongoing, but some companies have withdrawn operations on New York and California until the cases are finalized. Recently, however, a bill that passed the Colorado Senate with a 29-6 vote could help catapult more sharing programs into existence.

How Car Sharing Works

Peer-to-peer companies have members who are willing to rent their cars to strangers who need a short-term vehicle. The scheduling of the rental is handled by the company. Some companies like Getaround and RelayRides operate for profit, which means the member who owns the vehicle will receive compensation for the amount of time the car is used.

This profit for car owners is causing additional insurance complications. In states where liability insurance is required for all drivers, if your client allows a friend to drive his car, and the friend is involved in an crash, the liability insurance your client holds will provide him coverage. But what is being called into question in some states is whether liability coverage still will work if the auto owner is making money from allowing others to drive his car.

To help cover the owner of the car, the for-profit peer-to-peer rental companies like Getaround are providing insurance coverage including liability, comprehension, personal injury, medical payments and uninsured motorist coverage during the time the car is being rented.

It would seem that car sharing programs would directly compete with rental car companies, but since several of those companies are offering their own version of the program, this might not be the case. As these programs develop and create their own insurance policies, people who do not own a car but rent frequently might not need to buy insurance from agents anymore.

As the programs have the potential to grow, it could really affect the number of people needing an auto insurance policy, especially in larger cities where insurance policy holders are an agents bread and butter.

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