Peer-to-Peer Car-Sharing and Its Effects on Auto Insurance
Last Updated on February 6, 2023
The idea of carpooling is nothing new. In today’s eco-friendly mindset, the idea is encouraged and looked upon with high regard. With gas prices consistently over $3 per gallon, the idea is actually wallet-friendly as well. This is why so many people have chosen to use this effective method to get to work and various other locations. Based on data collected in the 2000 U.S. Census, 15.6 million commuters used a carpool to get to work. Now as long as the driver is not making a profit from the act of carpooling, he or she is covered by the standard insurance policy. In some states, people have taken the idea of carpooling to the next level and enacted peer-to-peer car-sharing programs that have raised questions about insurance coverage.
What Is A Peer-to-Peer Car Sharing Program?
A peer-to-peer car-sharing program, or P2P as it is commonly referred to, is a program developed that allows individuals to become a member of a car-sharing program that allows them to share their cars with total strangers by renting them out either on an hourly or daily basis. Also, if someone does not own a car, they are able to become a part of the program and borrow cars on an as-needed basis for a fee. Many programs have an initial fee for a membership and will also conduct background checks, but then members have access to a database that lists availability. There are for-profit and non-profit programs out there, and programs normally have a type of insurance coverage as well.
Popular peer-to-peer car-sharing programs in the United States include Turo, Getaround, Enterprise Carshare, Maven, and HyreCar.
For the individual who is thinking about renting out his or her personal vehicle, there are some general insurance concerns that should be addressed. If you are making a profit from renting out your vehicle, your personal insurance policy does not cover it. As mentioned above, peer-to-peer programs recognize this and provide some form of coverage. It is best to not only check your personal policy before enrolling in a program such as this but also thoroughly examine the company’s policy as well. If they do not offer any form of insurance, most personal insurance companies provide coverage for a driver that has the owner’s permission but does that extend to P2P programs? Only your insurer can answer that question.
Also, when your car is being subjected to many different drivers in varying conditions, it places a higher risk of an accident on your personal vehicle. One of the factors that go into determining an insurance policy is how the car will be used. Loretta Worters, vice president of communication at the Insurance Information Institute says that ‘Some insurers view car-sharing services as a higher rise, so they may cancel or not renew a driver’s car insurance policy or increase premiums if a policyholder’s vehicle is involved in an accident while it’s being rented.”
Liability and depreciation are areas of concern. If a car owner who has not properly maintained their vehicle rents it out and an accident occurs due to poor upkeep, which policy covers the damage? It is not known if all P2P programs provide any kind of vehicle inspection prior to renting. A law in Oregon that covers car-sharing states that the car-sharing company has the right to pursue the car owner for liability of any damages if it seems as if the state of the car was misrepresented.
It also can’t be guaranteed that everyone will handle an owner’s car with the same regard. Normal wear and tear happens much faster when 15 people are driving a car in various situations versus one person commuting to work every day. Also, if major damage occurs to the car the P2P insurance may cover the damage, but the value of the car may depreciate something a driver is ultimately stuck with.
Insurance Companies on Peer-to-Peer Sharing
Right now, many programs are being developed faster than insurance policies can keep up, and recently, limits have been tested which have raised many questions that need to be addressed going forward. Earlier this year, New York Times columnist Ron Lieber wrote an article addressing concerns insurance companies had about these new developments. After contacting several large insurers, he had this to say:
“They want you to know that RelayRides (now known as Turo) insurance won’t be adequate in the event of a catastrophic accident and that your own insurance company may take away your insurance if it even hears that you are lending your car to someone in exchange for a few dollars an hour.”
While these were Ron’s words, that general statement reflects the state that Liz Fong-Jones found herself in after renting her car through RelayRides (now known as Turo). The renter, driving the wrong way down a road, collided with another car carrying four passengers, all of who sustained serious injuries. While RelayRides (now known as Turo) provides a $1 million/ accident coverage policy and reimbursed Ms. Fong-Jones for her totaled car, the injury claims for all four passengers may total over $1 million when everything is settled. Who pays for that?
States such as California, Oregon, and Washington have recently passed laws attempting to address insurance and liability issues not only for vehicle owners but also for P2P programs to set a better standard when the unforeseen happens. If programs such as this are available in your area, it is highly recommended to extensively research the potential consequences it could have on an insurance policy.