10 Things Independent Agents Need to Know About Car Sharing Insurance

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  • The sharing economy, which involves the peer-to-peer based sharing of goods and services, is thriving. And it’s a concept that more and more people are now comfortable using. 

    There were 44.8 million US sharing economy users in 2016, and that number is expected to grow to 86.5 million by 2021, according to Statista. While this emerging new market looks promising, it has created some major insurance concerns — something that presents an opportunity for independent agents. 

    Here are 10 things you need to know about car sharing insurance so you can better accommodate the needs of the people using these services. 

     

    1. More People Would Use Car Sharing if Insurance Was Offered

    Key players like Uber and Lyft are tremendously popular, with 14 million trips completed each day on Uber alone, explains business writer, Mansoor Iqbal. But even more people would be willing to use car sharing if insurance was offered. 

    Matthew Lerner at Business Insurance agrees, saying 71 percent of consumers would be more likely to use this type of service if insurance was provided. And 70 percent would be more likely to offer car sharing as a service if insurance was available. 

    This shows the potential that’s out there. By plugging into a local car sharing ecosystem and offering the right coverage options, independent agents can quickly increase their book of business.  

     

    2. Trust is Essential for Drivers and Passengers

    There’s an inherent vulnerability that comes with both offering and using a car sharing service. Both parties need to know they can trust one another and that they’ll be covered in a worst-case scenario. And that’s where insurance comes in. 

    “Insurance couldn’t be more important for companies like this,” says Christopher Moore, deputy head of casualty at underwriting company Apollo Syndicate 1969 in London. “As soon as you start asking people to share their time, share the things that are most important to them, you need insurance to provide that trust factor.”

    And it’s equally important for passengers. They need to know they’ll be covered in the event they’re injured if their driver gets into an accident.

     
     

    3. Many Drivers Have Insurance Coverage Gaps

    The sharing economy has created a unique situation where drivers use their vehicles for personal and commercial purposes. Ohio-based Grange Insurance points out that many drivers who work for companies like Uber and Lyft lack comprehensive insurance coverage. Often their vehicles aren’t registered or insured as commercial vehicles, thus creating a coverage gap. 

    Commercial coverage may be on their radar, but the additional cost would often negate the benefits of obtaining it. Of course failing to obtain commercial coverage puts them at a greater financial risk.

     

    4. Drivers Have an Increased Risk Profile

    Because drivers are on the road longer, the risk of loss for insurance carriers is increased, says insurance attorney Jeremy Heinnickel. However, with car sharing being so new, there’s a lack of historical and actuarial data available, which makes it difficult for carriers to estimate premiums. 

    This means many insurance providers are likely to err on the side of caution and charge car sharing drivers more for premiums, as they are deemed a greater risk. 

     

    5. Flexible Products Can Fill Those Gaps in Coverage

    As an independent agent, you can help drivers get the exact coverage they need without breaking the bank by providing flexible coverage options. And by doing so, you can gain a significant competitive advantage. 

    Car sharing has created a demand for innovative, cutting-edge insurance products, says Graeme Trudgill, executive director at the British Insurance Brokers’ Association. Agents who are able to satisfy that demand and offer flexible products could easily get the upper hand over other insurers in their area.

    The Compare.com team highlights pay-per-mile insurance company, Metromile, which offers car share drivers off-the-clock coverage policies as well as coverage for when they’re waiting for passengers. This way drivers pay five cents per mile for personal travel or waiting periods in addition to the $40 a month base rate and nothing when they’re driving passengers. This is a good example of how you can adapt to the needs of drivers. 

    Insurance.com adds that drivers should also obtain gap coverage, which covers the difference between what they owe on their car and the car’s actual cash value. 

     

    6. Passengers Have Coverage Gaps as Well 

    But what about insuring passengers? The driver’s car insurance coverage applies to passenger injuries if it’s a commercial policy or a personal car insurance policy with a special provision providing coverage while the driver is offering rideshare services, says legal writer Curtis Lee

    Beyond that, Uber and Lyft both carry third party liability insurance of up to $1 million, which kicks in once the driver’s insurance has reached its limit. So there’s robust coverage in place for passengers if their driver is at fault for an accident. 

    But it gets a little trickier if an accident is caused by another driver. In this case, a passenger would seek money for damages from the at-fault driver. And that’s fine if they have car insurance and enough to fully compensate a passenger for their losses. However, if the at-fault driver isn’t insured or doesn’t have enough for full compensation, the passenger is placed in a precarious position and may not be able to cover all of their damages. 

    This brings us to our next point.

     
     

    7. A Named Non-Owner Policy Can Fully Cover Passengers 

    Independent agents can provide full protection to passengers with a “named non-owner” policy.

    “If the owner is uninsured, or has low limits of liability, this type of policy can protect you as a passenger,” explains the National Association of Insurance Commissioners. “These policies include protection for bodily injury or property damage, medical payments, and uninsured/underinsured motorist.” 

    A non-owner policy is a fairly affordable option and has rates that are 5 percent to 15 percent cheaper than those for a standard policy, insurance resource ValuePenguin adds. So this is a type of coverage you may want to offer those customers using their personal vehicles to earn extra income.  

     

    8. Car Sharing Can Also Create Coverage Concerns for Mechanics

    Local mechanics that are official partners of car share companies are part of the insurance conversation too. In order for someone to become a driver, their vehicle must first pass an Uber of Lyft vehicle inspection, writes Washington-based auto repair company, Platinum Automotive Services

    As a result, those mechanics need to be properly covered and make certain that their liabilities and insurance concerns are addressed. Independent agents can help.

     

    9. Professional Liability Insurance Can Be a Nice Add-On for Mechanics 

    Nearly all automotive shops have garage liability and garagekeepers insurance, explains business insurance writer Kimberlee Leonard. And if they have employees, workers compensation is required. 

    Another type of coverage official partners of car sharing companies should consider is professional liability insurance. This will protect mechanics against claims and lawsuits that stem from injuries or losses that are the result of work not being done correctly or that’s not up to professional standards.  

     

    10. Education is Critical for Selling Coverage

    The points mentioned clearly indicate that car sharing presents at least some level of risk for many drivers and passengers, as well as mechanics. As an independent agent you understand this. But you can’t expect all of your customers to be so knowledgeable. 

    The sharing economy is still a relatively new concept, with a lot of gray area when it comes to insurance. Simply figuring out the specifics of exactly how car sharing works is still confusing for some people. Throw in insurance, and they’re completely lost. 

    So it’s essential to educate consumers about coverage gaps and how your products offer viable solutions, says Ryan Ward at American Modern Insurance. Making education a core part of your strategy should help get more people on board so they understand the full value they’re getting by purchasing coverage. 

    Josh Ritchie, cofounder of content marketing agency Column Five, suggests using content marketing to do this. Developing practical materials like how-tos and deep dives into relevant insurance topics should supply consumers with the right information at the right time. 

     

    Capitalize on a Burgeoning Market 

    There are expected to be around 36 million car share users by 2025, according to entrepreneur Brandon Gaille. While in many ways car sharing has revolutionized travel, it’s created some real concerns from an insurance standpoint. 

    Being the agent in your local market who offers a variety of innovative solutions for drivers, passengers and mechanics allows you to tap into this growing industry and can give you a decided advantage over competitors. It’s a matter of providing the right coverage and properly educating your customers on what they need to stay protected.

     
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