This opinion piece is by Paul Smith, COO and Co-founder at DigiSure. We are entering an era where jumping in a new car each trip is more convenient than owning a vehicle and all the responsibilities that come with it: The global car-sharing market size reached $7 billion in 2022, and IMARC Group predicts it will grow at a CAGR of 13.4% by 2028.
Some 67% of 18-34 year olds find annual car insurance excessively expensive, leaving the shine of traditional vehicle ownership to wear off. Instead, consumer demand for budget-friendly transportation choices and a wave of cutting-edge technological breakthroughs, such as telematics and connected vehicles, is fueling a car-sharing surge. I understand why they feel that way, the cost to cover my teenager is $500 a month here in the Bay Area.
Shared mobility providers are creating platforms that connect vehicle owners with renters and enable car sharing for flexible periods, implementing usage-based systems to shrink insurance costs by only paying for coverage when needed. These systems gather and track everything from the time of day, to the weather, to the road conditions in the area.
However, with these evolving dynamics come fundamental questions: Is this renter a safe driver? Is the car safe to drive? In the event of an accident, untangling liability details during the claims process can be prohibitively complicated.
With the rise of shared mobility platforms, insurance providers today have their hands full. Let’s look at the challenges of shared mobility insurance and how vehicle connectivity makes lives better.
Ownership Complexity
In personal auto policies, the vehicle’s owner is liable for any accidental damage, yet with shared mobility comes shared responsibility.
For example, while accidents caused by poor driving behaviour would result in a payout from the renter, they are not necessarily the source of all risk. A negligent owner could be advertising an unsafe vehicle, which could ultimately cause an accident. In this scenario, accountability could fall on the owner. Yet, in most cases, the platform is legally required to ensure the vehicles they offer on their site are safe. In events unrelated to the owner or driver’s error, the owner’s coverage must shield the renter from being financially responsible.
That’s why insurers need to create the proper coverage bundle that protects the operator, the vehicle, the owner, and the platform.
Variable Drivers and Risk Profiling
The next challenge for insurers is to measure risk and underwrite each driver.
Whether insurers are handling a claim on a traditional owner’s annual insurance policy or a short car-sharing trip to run a quick errand, it only takes a moment for an expensive claim to occur. Although the total premium is very different between the annual policy and two-hour coverage, the liability limits (and potential payout) are similar, if not identical—necessitating an equally rigorous underwriting process.
Proper driver vetting requires user authentication and data record checks for both on- and off-platform behaviour. Verified identification is essential to confirm age and driving experience, while motor vehicle records inform insurers of previous violations.
Usage-Based Insurance
Imagine driving in rush hour, through an urban centre, while trying to quickly deliver someone’s takeout order. Compare that with driving around isolated country roads in the summer during your vacation. How do insurers quantify on-demand, usage-based insurance (UBI) that aligns with the vehicle’s specific period in use? And how do location, purpose, and duration come into play?
For building UBIs, telematics solutions and connected cars are invaluable. They provide a level of trip detail, including safe driving behaviours, duration, time of day, traffic levels, and weather conditions. This means that when drivers become repeat customers, insurers can use data from prior trips to refine packages, offering discounts for safe and responsible operations.
Nevertheless, it’s important to note that these capabilities might not all be appropriate for utilisation or accepted by consumers, and the potential relies on the ability to ingest that data.
Accident Reporting and Claims Processing
Investigations for insurers are very difficult in the realm of shared mobility. A single vehicle could have been rented several times around the time of the accident, making digital tools and data-driven claim capabilities even more essential.
In many cases today, the claims adjuster needs access to all the activity that may have transpired, a lack of data leaving the adjuster uninformed and drawing out the inquiry. A good solution is to know all the transactional details, pull in any telematics data if available, and provide photo and video evidence from every driver along the way.
Data and Privacy Concerns
From infotainment systems to automatic braking, all new cars are digitally connected, and manufacturers control the data streams from the vehicle—making them key stakeholders in the direction and evolution of shared mobility. Yet, any data breaches or misuse can lead to substantial liabilities for both parties.
Manufacturers of connected vehicles and telematics software, shared mobility platforms, and insurance providers need to guarantee the privacy and security of the data they collect about users and their behaviours. They must adhere to all security best practices like ISO27001 and SOC2, receive informed consent, employ secure encryptions, govern access controls, and regularly monitor safety protocols. For some industries, protecting personal information is a new requirement that is challenging to navigate.
Shared mobility providers and insurers would benefit from working closely with manufacturers to form detailed business agreements that ensure secure access to the data and insights needed to supplement UBI packages.
Regulatory Variability
In London and throughout the UK, car-sharing companies have to follow the rules set by the British Vehicle Rental and Leasing Association (BVRLA). However, while there is no specific car-sharing code of conduct, other organisations are working with authorities to clear the path.
CoMoUK, an organisation focused on making shared mobility work better for everyone, runs a program that gives a thumbs-up to car-sharing operators. These rules and programs make sure local councils and users can trust that car-sharing insurers are playing by the same fair rules, and Transport for London (TfL) has their back.
Mobility insurance providers need to be on top of the latest trends in their region, how these impact road safety, and balance the liabilities of these solutions with appropriate insurance packages.
While the car-sharing sector is on an upward trajectory, the insurance landscape for shared mobility is intricate. However, with the symbiotic relationship between technological advancements and evolving UBI models, there’s a bright future ahead. Insurers, armed with refined data practices and a keen understanding of consumer needs, are well-placed to develop packages that benefit both shared mobility providers and their end-users.
The thrills of connected cars and UBI models bring a complicated and exciting era for insurance providers. After five years of building shared mobility insurance packages and a background in the traditional insurance industry, I’ve seen firsthand how the two insurance types align to protect future generations on the road.
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