Driving success for the emerging car-sharing economy via smart insurance

Technology innovation is helping to redefine the concept of ownership thanks to a burgeoning sharing economy. Nowhere is the opportunity for disruption more apparent than in the mobility sector. Yet there are challenges. Existing personal insurance for vehicle renters and owners is not valid in the fast-emerging car-sharing sector, and basic packages offered by the platform providers can put users off with potentially large deductibles.

That makes finding the right insurance partner increasingly important. This is where innovative new AI-powered platforms offer a tremendous opportunity for car-sharing firms – to differentiate and grow with highly personalized, customer-centric experiences.

It's good to share

The sharing economy is nothing short of a revolution in how people connect and consume. If the 20th century was dominated by an industrial economy and centralized, top-down institutions, then the 21st is all about collaboration and distributed connected communities.

Internet-based technologies have been fundamental in facilitating this transition, first connecting humans together and enabling them to share information and social updates, and now connecting them to shareable assets. Younger consumers, in particular, are willing participants in a movement that offers benefits that exceed basic financial gains, such as helping the environment and building communities.

According to Mastercard, the sharing economy has already become “a deep socio-economic trend that is fundamentally changing the way we live our lives.” It could cover everything from professional services to music sharing, staffing, P2P lending and home sharing. Consumers today even have the option to rent their clothes out via a new generation of platform providers.

Car sharing is among the most popular sector of this fast-growing economy, with a market predicted to exceed $11bn by 2024.

Car sharing is among the most popular sector of this fast-growing economy, with a market predicted to exceed $11bn by 2024. It’s in the top four sectors in terms of project CAGR between 2013 and 2025, estimated to expand by 23%, according to Mastercard. Firms like Turo, Getaround and RVshare are attracting customers in their droves to Airbnb-style platforms which enable owners to rent their vehicles out on-demand to users.

A roadblock to success

But for these platforms to offer the kind of quick, simple, and hassle-free experiences customers demand, while adding value for both renters and car owners, they need to overcome one major hurdle: auto insurance. There are three major types available for drivers: liability insurance covers damage to any other vehicle and passengers involved in an accident but not you; collision covers damages to your car; and comprehensive insurance covers incidents other than collisions, such as theft.

The issue for both car renters and owners is that their existing personal cover is unlikely to be valid for car sharing. Personal insurance covers traditional rentals but not P2P car sharing, which is classed as commercial use. That makes it vital in most cases to buy insurance from the car-sharing platform provider. But these packages can start with pretty basic coverage, sometimes not including collision or comprehensive, so users will need to fork out more for true peace of mind. Deductibles of $1000 to $3000 are also not uncommon in the event of a claim, especially for renters, which could further impact brand loyalty and the user experience. 

For renters, there’s also the potentially arduous process of claims applications. They will be expected to hand over more cash in handling and other fees, potentially as much as $3,500, while the claim is being processed. There’s no certainty that they’ll be fully reimbursed after this, which can also undermine the holistic car sharing experience and potentially put users off from trying the service again.

Getting personal

This is the opposite of what car-sharing platform providers need. They require smart, customer-centric insurance offerings delivered at the point-of-sale which take the pain out of traditional approaches. Fortunately, API-driven solutions like those provided by Cover Genius slot seamlessly into the customer journey, providing a highly user-friendly experience: from simple-to-understand policies to instant payments for approved claims. 

We offer various supplemental products to the renter such as collision damage waivers, or insurance which protects the customer from out-of-pocket costs such as those large deductibles. Intelligent algorithms can help to dynamically select the right policy bundles for each customer from a large pool of underwriters. AI capabilities can support insurance based on any metric, including microseconds and mileage for usage-based pricing. Geo-location further personalizes the experience to offer the right currency, language and country for each user. 

This is the kind of agile, data-first, and highly personalized approach to insurance that car-sharing platforms need. Experience is at the heart of the sharing economy. Create unique, compelling ways to participate and you will find a growing audience, especially among younger consumers. But to do so, providers must tackle the roadblock of legacy insurance by reaching out to new insurtech innovators who can deliver seamless, personalized experiences to delight their customers.