Personal car-sharing takes off as states ease insurance laws


Baby, you can drive my car … for a few bucks.

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 aimed at matching urban dwellers without cars and car owners looking to make some extra cash.

There are about 250 million personal cars in the USA, and they’re idle an average of 22 hours a day, according to Getaround, the largest of the start-ups with about 1,500 cars, mostly in San Francisco and parts of San Diego. Its competitors include Spride Share, RelayRides and JustShareIt.

Spride operates only in the San Francisco area. RelayRides has operations in San Francisco and Cambridge, Mass. JustShareIt, which hasn’t launched publicly and allows only invited users for now, has cars and motorcycles in San Francisco and Los Angeles. They hope to expand if more states help clear some insurance problems that can result from owners sharing their cars.

Renters pay typically $5 to $15 an hour for a car in their neighbor’s garage or office parking lot. A Subaru Impreza hatchback sedan at Getaround costs $6 an hour, while an electric Tesla Roadster sports car comes with a $50-an-hour price tag. Renters agree to drive with reasonable care, pay any parking tickets and refrain from smoking in the car. An insurance policy provided by the rental company covers any accident, typically up to $1 million in liability (and $500 deductible for borrowers).

Car owners agree to have a remote entry system installed in their cars and can earn up to 40% to 60% of the borrower’s fee, or about $200 to $300 a month if they rent an hour a day.

Most transactions are conducted online. Customers use their smartphone or key card to unlock the car. A built-in Global Positioning System device tracks mileage and location. “We basically think that their next car can be just a cellphone (away),” says Sunil Paul, CEO of Spride Share.

There are insurance obstacles in many states that the businesses face before they can take off. “There are all kinds of related issues regarding exposure to liability for both parties,” says Neil Abrams, a rental car industry consultant. “If I allow a drunk driver to drive my car and he runs into a school bus, whose liability is that?”

In most states, insurers can cancel the policy of customers who use their cars for commercial purposes. But the car-share companies have been emboldened by a new law in California and one pending in Oregon that prohibit insurers from canceling the policies of drivers who share their cars.

The laws ensure that owners are not liable for damage when their cars are used for personal vehicle sharing. “Owners’ insurance carriers are not liable for anything that happens during the sharing period. Consequently, it should be no impact to owners,” says Sam Zaid, CEO of Getaround.

Other logistical issues are being worked out as firms test their services: borrowers who return a car late, workable remote-entry systems, cars returned dirty and borrowers who smoke. “Owners can set the rules. They can reject (any borrowers). You have total control of your car. We didn’t want to compromise that,” Zaid says.

Self-enforcement takes place in the user community as borrowers and owners are ranked and are subject to fines for rule violations. “We’ve found that borrowers realize it’s their neighbors’ cars. They treat them with more respect,” says Jonah Bliss of RelayRides.