Friday, June 24, 2011

Stupid Client Tricks: P & C Edition

So, your car sits idle (but hopefully not idling) 22 hours a day. Your car payment and insurance meters, though, run 24/7. Wouldn't it be great if there were some way to turn that down-time into cold cash?

Turns out, there just might be, but there's a catch. Actually, there are a lot of catches.

Here's the scoop:

Yesterday's McPaper featured a front-page item on "personal car-sharing:"

"Seeing a business opportunity in millions of cars that sit idle at office parking lots or on weekends, several start-up companies have introduced "peer-to-peer" car-sharing services ... Renters pay typically $5 to $15 an hour for a car in their neighbor's garage or office parking lot."

It goes like this: Jim's newish Saturn sits in the parking lot all day, and Bob needs to run some errands out in the 'burbs. Bob signs up with (for example) Getaround, to which Jim is also subscribed (as a vehicle provider). Getaround charges Bob $10 an hour for the use of Jim's car, which it then splits with Jim. Win-win-win.

Or is it?

This is a blog about insurance, after all, and there are a host of issues with this seemingly simple and convenient new business model. Unlike a regular rental car service, Getaround doesn't own the vehicles. And since these are private passenger automobiles, they're covered by private passenger automobile insurance. Thanks to my friend Bill M, I was able to score the relevant portions of a typical auto policy (YMMV):


... to any automobile while used as a public or livery conveyance." [emphasis added]

Now, this doesn't apply to "ride-share" or other car-pooling arrangements. But the Getaround model isn't a car-pool: you're renting out your car, and that changes the risk in a myriad of ways.

When you bought your policy, you agreed to the coverages and exclusions in the policy, and also to your own (minimal) obligations, one of which is to inform the carrier of a "material change" in the risk. Those of us with teenagers are well-aware of how this works: you can't just neglect to tell your insurer that your 16 year old son is now driving the family station wagon minivan and expect them to pay up with no fuss when it gets totaled. Likewise, renting out your car to someone you've never met (and will probably never even see!) is a dramatic change in the nature of your insurance policy's risk.

Which then raises all kinds of issues:

First, let's say that you've already bought insurance, and then you sign up with Getaround. If you call your agent and tell him, the likelihood is that the policy's going to be canceled, because you now need a commercial lines plan.

Let's say you don't call him: what are the odds you're going to be a happy camper when Bob totals your car into the side of a schoolbus full of elementary students?

Then there's this: you've now dramatically restricted your ability to shop around for new coverage. Again, if you don't tell the new carrier, then you've lied on the application (a bad idea, and a felony). If you do disclose it, you're going to be looking at some major premiums for a commercial policy.

California recently passed (and Oregon is poised to pass) a law forbidding carriers from dropping drivers who engage in car-sharing. That seems great on paper, but again, Bill M points out that this will have one of two outcomes: either carriers will flee the state, or they'll raise everyone's premiums to make up for the increased risk.

At least one of the carshare companies provides liability coverage to the renters. That's nice, but anyone that thinks that the parents of the kids in the aforementioned schoolbus aren't going to be coming after the car's owner is definitely inhaling.

In perhaps the stupidest comment I've read in a long time, Getaround's CEO avers that "[o]wners' insurance carriers are not liable for anything that happens during the sharing period. Consequently, it should be no impact to owners."

Rotsa ruck with that, Mr Zaid.
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