Car Subscription and Sharing Models: What Role Does Insurance Play?

Is vehicle ownership old fashioned? Just as movies and music have transitioned to on-demand models, modes of transportation are evolving, and insurance must keep pace.

Car Subscription and Car Sharing Models

Car subscriptions and car sharing models both give drivers access to a car without buying or leasing a vehicle, but they do it in slightly different ways.

  • The car subscription model is often backed by Original Equipment Manufacturers, and members have access to fleet-owned models. Participants typically pay a monthly fee for ongoing access. The car subscription model can be more expensive than car sharing, especially for people who don’t need a vehicle very often.
  • In the car sharing model, the service is often peer-to-peer, with some participants making money by lending cars and others paying money to rent cars. However, some car sharing services may use fleet-owned vehicles, as well. Participants typically pay for the car when they need it without an ongoing commitment.

The Appeal of Car-on-Demand Services

Cars spend a lot of time parked in garages or on the side of the street. In areas where parking spaces are at a premium, this can be difficult and expensive. Cars also rack up other expenses such as maintenance and vehicle registration.

Car subscription and car sharing models provide an alternative. Instead of taking on all the responsibilities of car ownership, you can get a car when you need it, without the hassle that normally comes with car ownership.  

Now that so many people are working from home, car sharing and other on-demand car services may have an even greater appeal.  According to Pew Research Center, 71% of employed adults who can work from home are working from home during the pandemic, and 54% want to continue working from home after the pandemic ends.

Insurance Implications

Car subscription and car sharing companies typically provide their own insurance coverage.

According to the Mobility as a Service report from Marsh, the coverage provided in car subscription programs is generally more robust than the coverage provided in car sharing programs. This makes sense because the vehicles used in car subscription programs are often new models, and the subscription often includes additional perks and concierge services. Also, the model is typically more expensive, and the drivers may have higher credit scores and be considered better risks.  

Volvo’s Care car subscription program provides insurance coverage that meets or exceeds the state’s requirements. Consumers cannot pay Volvo for additional coverage, but they may be able to get extra coverage through their own umbrella policy, depending on the insurer’s rules.

In P2P car sharing programs, both the car owner and the car lender need to think about insurance. Again, the car sharing company will likely provide insurance. However, it may not be enough to meet the needs of the users.

According to Consumer Reports, car owners should read over the insurance details carefully before signing up for car sharing, and it’s especially important to pay attention to the uninsured/underinsured motorist coverage. Insurance companies will also likely want to pay attention to who’s using car sharing, as this can impact risks and create new coverage needs.

New Opportunities for Insurers

As car sharing and car subscription models gain popularity, insurance companies have new opportunities:

  • Working with car sharing and car subscription companies to provide insurance coverage.
  • Providing umbrella coverage or other coverage options so participants can boost their coverage and fill in coverage gaps when using car sharing and car subscription services.
  • Providing people who lend their cars in P2P car sharing programs with suitable coverage.

To meet consumers’ evolving insurance needs, you need an agile policy administration system that allows you to easily add new products, rates and rules. Silvervine’s Evergreen delivers this and more – all at a moderate price point with rapid implementation.

Intrigued? Request an Evergreen demo now.