Car sharing was pioneered in the U.S. by ZipCar, which created a club that allows participants access to a fleet of vehicles owned by the company for hourly rentals. Another form of car sharing called peer-to-peer rental is used by companies such as RelayRides, Getaround and JustShareIt. Under peer-sharing, car owners put their personal cars up for rent.
Big players such as Enterprise Holdings Inc. and The Hertz Corp. are getting into the fleet subscription car-sharing business. In January 2013, Avis Car Rental bought ZipCar, which serves more than 20 metro areas and 300 college campuses with 11,000 vehicles and has 760,000 club members. The services are growing in San Francisco and Los Angeles and spreading fast elsewhere. The car-sharing industry is expected to grow to $6 billion globally by 2020, according to the CarSharing Association.
Insurers and regulators complain that some subscription car-sharing outfits provide renters with only the minimum state requirement for liability insurance, which is often far below the level needed to be completely protected against million-dollar liability verdicts. Liability insurance is the part of an auto policy that pays for bodily injury and property damage to others in an accident. Liability insurance can be as little as $15,000 for all injuries and $10,000 for property damage.
They also say folks who allow their personal vehicles to be rented out using peer-to-peer services may not be adequately covered for their risks, either. By renting out their vehicles to others through RelayRides, Getaround and JustShareIt for as little as $25 to $65 per day car owners can earn $5 to $12 per hour, according to a research report by the University of California at Berkeley.
Only California, Oregon and Washington have revised their insurance laws to cover these types of peer-sharing services, by spelling out where the vehicle owner’s policy ends and the car-sharing services’ commercial policy begins, according to the National Conference of State Legislatures. Insurance in the U.S. is regulated by the states.
In May 2013, San Francisco-based RelayRides was forced to suspend operations in New York after the state Department of Financial Services ordered it to “cease and desist” advertising and alleged violations of insurance law. The department accused the company of offering insurance that wasn’t state approved and could leave New York customers and car owners liable for death, injury, theft or property damage that occurred during the rental. The company had claimed that car owners were covered for up to $1 million liability in an accident. RelayRides Chief Executive Andre Haddad stated the company would work with authorities to address their concerns. Emails and phone calls to the company were not returned.
The New York Superintendent of Financial Services, Benjamin M. Lawsky, in May warned consumers using car sharing services that their personal auto policies wouldn’t cover them for liabilities in the state, saying “New Yorkers who rent their own vehicles through RelayRides and other car-sharing programs may be left paying out of their own pockets for damages and injuries stemming from any accidents that occur during the rental period.
At the very least, car owners need a commercial auto insurance policy that fully protects them if they choose to rent out their cars to others using a car sharing service, insurance industry officials say.
“If you are participating in peer-to-peer sharing you should have a commercial policy because if you are in an accident, from a liability perspective, most likely your insurer will not cover you because you are using it as a commercial venture,” said Loretta Worters, a spokeswoman for the Insurance Information Institute, an industry non-profit organization. Drivers renting from peer-to-peer services also should be concerned, she said.
Some auto insurers are considering revising their policies to address car sharing. Allstate, the country’s second largest auto insurer by premiums, warns policyholders against renting out their cars. “Allstate is watching the rideshare movement and, as the practice gains larger scale, we are considering possible policies and products that may address the insurance implications. That said, our current standard policy excludes coverage for commercial use. If somebody rents their vehicle to another party, their vehicle would not be covered by their auto policy,” said Justin Herndon, an Allstate spokesman, in an emailed statement.