Driving Change

Wilson Wood recalls that when car-sharing services started popping up in the late 1990s, insurance companies had no idea what to make of them.

“They were initially quite skeptical about this new service,” says Wood, who is chair of Car Sharing Canada and founder of Vrtucar, a transportation network that serves 1,800 members with more than 100 cars in Ottawa and Kingston in Ontario, and Gatineau in Quebec. “Some of these concerns still exist today,” he adds.

Car sharing is a membership-based service available to all qualified drivers who are 21 years of age and older and have a G-class licence. No separate written agreement or contract is required each time a member uses or reserves one of a fleet of vehicles, which are located at self-serve locations in a community. Members get access to a vehicle 24/7, while paying an hourly fee that includes gas and insurance.

Currently, more than 40,000 members use car-sharing services in Ontario in cities such as Hamilton, Kingston, Kitchener-Waterloo, Ottawa and Toronto. Major cities in most provinces (including Halifax, Montreal, Winnipeg, Regina, Calgary and Vancouver) also offer similar programs.

As of January 1, 2012 — based on data provided by Susan Shaheen at the University of California, Berkeley — 92,118 members shared 2,526 vehicles among 19 car-sharing organizations in Canada. Some familiar names include AutoShare, Communauto, car2go, Modo and Zipcar. Zipcar alone operates a fleet of 10,000-plus vehicles in 20 major metropolitan areas with more than 760,000 members in the United States, Canada, the United Kingdom, Spain and Austria.

Analysts expect the number of people using these services to double in the next five years. Research firm Frost & Sullivan estimates that approximately 980 car-sharing programs exist globally. By 2016, Europe and North America combined should account for more than 9 million members sharing 150,000 vehicles through more than 450 programs. In some cases, large auto makers have become involved in car sharing, either as experimental start-ups (Daimler and car2go) or as add-ons to existing services (GM’s OnStar and Relay Rides).

“This shows that our relationship with the automobile is changing,” notes Kevin McLaughlin, president of Toronto’s AutoShare, which has more than 12,000 people sharing 300 vehicles. “The old idea that there is one driver for every vehicle will not be the case in the future,” McLaughlin contends.

POTENTIAL STALL

Many in the car-sharing sector point out, however, that auto insurance can act as an obstacle to expansion of the service, which is touted as an environmentally friendly and cost-effective option to individual vehicle ownership.

One of the first questions is exactly how insurance should be structured for multiple drivers sharing one vehicle. Wood notes that Vrtucar is “grandfathered” under an older auto insurance policy from The Co-operators, in which vehicles are covered under personal lines with listed drivers.

McLaughlin’s service, on the other hand, has a commercial auto insurance policy on its fleet of cars, also from The Co-operators.

“Insurance is a huge barrier to car sharing,” says Wood, while acknowledging that he has been grateful for his individual partnership with The Co-operators. “With no clear direction from the Financial Services Commission of Ontario (FSCO), the application of auto insurance to car-sharing organizations is neither consistent, nor something that the consumer can look to with some sort of guarantee,” he adds.

Both Wood and McLaughlin say that rates for their auto insurance have stabilized recently, down from much higher levels five years ago. And they are also seeing more competition and interest from brokers, “especially considering that our monthly premiums are about $18,000,” Wood notes.

Still, insurance rates for car sharing are double or triple what an individual car owner would pay for a similar policy. 

COVERAGE QUESTIONS

Another important issue is liability and accident benefits under current legislation, particularly in Ontario. As car sharing is seen neither as a “car rental” service nor a form of personal ownership, there are grey areas in how members of the service are covered under the auto insurance policy.

“Current legislation is essentially based on the 1950s and 1960s model of car ownership,” says Wood, where drivers are either car owners or family members of car owners. “This lack of direction or clarity in the regulations puts our insurance providers and the car-sharing organizations liable when a car-sharing member is walking, riding a bicycle or using public transit and involved in an auto collision,” he contends.

In fact, Wood says two of his service’s largest insurance claims relate to members injured in situations that did not involve the use of a car-shared vehicle. In one case, a member of his service was injured in a fall while exiting a public bus. Given that car-sharing networks have thousands of members walking, biking and taking public transit, this is a difficult exposure to measure and contain, he says.

“It is hard to understand how the legislation relates an accident benefits claim back to any tenuous connection to an auto insurance policy,” Wood observes.

McLaughlin reports his insurance company has informed him that it would challenge any liability for accident benefits related to members who are not operating a car-sharing vehicle at the time of an incident. But lingering questions remain, especially if a case goes to court.

Car-sharing services are pushing for “a fair and suitable playing field” with regard to insurance regulations that “provide the necessary protection for our members and our day-to-day operations,” Wood reports.

“However, FSCO and the Insurance Bureau of Canada (IBC) are silent about car sharing,” Wood says. “We don’t exist. Car sharing through an organization or supplier is not addressed in auto insurance regulations or legislation.”

FSCO notes in a statement, “As a risk-based regulator, (we) actively monitor the auto insurance marketplace for any emerging issues or gaps in consumer protection. Currently, we have identified no significant consumer protection issues around insurance coverage for car sharing or peer-to-peer car-sharing services.”

IBC does not have an official “position” on car sharing, notes Pete Karageorgos, the bureau’s manager of consumer and industry relations. However, Karageorgos says that insurance companies may be cautious about a commercial auto policy in which not much is known about the individual driver records or loss experience.

“I think one of the key challenges is that car sharing is not as strict as a traditional fleet policy, in terms of driver abstracts, experience, training or loss control,” Karageorgos says. “You may not know who exactly is the insured.”

SHARE AND SHARE ALIKE

Car sharing is just one example of different mobility options in today’s vehicle marketplace. Peer-to-peer car sharing, also known as p2p, is growing significantly in the U.S., especially in key cities such as San Francisco and Boston.

Companies like Relay Rides, Get- around, JustShareIt and Wheelz allow car owners to rent out their private vehicles through a member-based service. Relay Rides, which has raised more than $13 million from investors like Google and GM Ventures, also has an agreement with GM for subscribers to its OnStar communication assistance program.

Peer-to-peer service providers handle reservations and payments — as well as insurance. With the renting of private vehicles for a profit-based service, there have been questions about auto insurance policies and regulations. In most cases, basic personal auto insurance policies do not cover the commercial use of a vehicle, and insurers may cancel or non-renew coverage if a personal vehicle is rented for a fee.

Media reports indicate that at least one insurer in the U.S. — Geico — has amended its policy to explicitly read that car sharing is not covered.

Three states in the U.S. — California, Oregon and Washington — have passed new legislation to deal with p2p car sharing. California’s Bill AB 1871, introduced in January 2011, establishes that personal car sharing is not defined as commercial usage of a car and prohibits insurance companies from cancelling insurance. Similar legislation became effective in Oregon in June 2011 and Washington State in April 2012.

RENTAL DISAGREEMENT

In provinces such as Ontario, McLaughlin says that regulations do not permit renting out of a privately owned vehicle. Owners may have the option of registering through a car-sharing service such as AutoShare, thereby qualifying for insurance.

“As it stands now, however, there would have to be changes in insurance regulations to reflect this p2p option,” McLaughlin suggests.

He points out “things could get a lot weirder” in mobility and insurance now that Google’s self-driving cars have been declared legal for testing in Nevada and California. Wood reports that, even today, programs like ride sharing, private shuttle service and van pools are all becoming much more mainstream in the world of private transportation.

“I think the stereotype of one family, two kids and two cars in the driveway is outdated and reflects the institutional bias of car companies,” Wood comments. “I would like to see FSCO and others take more of a leadership role in this area,” he adds.

The chair of Canada’s car-sharing association, though, notes there has not been much progress on the regulatory front.

“We have been trying to get our foot in the door at FSCO, but we don’t necessarily have the lobbyists or time to get our points across,” Wood says. “We are seen as heretics by the automobile industry and, perhaps by extension, some auto insurers. But sooner or later, they are going to have to deal with these new mobility options.”