The “sharing economy” continues to provide individuals and families with non-traditional ways to rent vacation properties, hitch a ride via a ridesharing service, and even rent vehicles for short-term use. By now most of you are probably somewhat familiar with companies such as VRBO, Airbnb, Uber, and Lyft. However, if you aren’t, these companies allow individuals to conduct business on a peer-to-peer level, taking the place of traditional property management, taxi, and rental car services.

I recently took a call from a personal insurance client of mine who is considering buying a new Tesla with the hope of renting it out via (a site I wasn’t familiar with until I spoke with him). The site states that it allows individuals to rent vehicles from other individuals and boasts that over 800 unique makes and models are available.  They encourage visitors to “bypass the rental counter and book unforgettable cars from friendly locals.”  In the words of my client: “Traditional rental car companies are worried.”

This statement made me contemplate a couple of things, but most importantly, can I find an insurance carrier who would be willing to cover his car under this specific type of situation?  Just because these services are thriving, doesn’t mean the insurance industry has followed.  After checking with all of the insurance companies our agency represents, as well as quite a few national brokers who have specialty transportation departments, I discovered that the answer was “No.”  Every one of them politely declined to consider this situation.

When I explained this to my client, he started to get frustrated.  He didn’t understand why Turo would offer insurance coverage for individuals who rent out their vehicles through their service (under a master policy), but he couldn’t find an individual policy to purchase which also provided coverage for this exposure.  Obviously taking Turo’s insurance cuts deep into the renter’s profit margin.

To help him understand, I explained that Turo collects information on each potential renter, such as driver’s license number, identity verification and insurance score (however the website doesn’t mention if they run motor vehicles reports or claims history report), so they, in turn, have more information on their exposure.  Since the vehicle owner is not provided with this same information, the vehicle owner and potential personal insurance carrier would have no idea as to what type of risk they are facing.

The moral of the story is that just because you have the opportunity to rent out your home, car, bike, or whatever other property you can make money from, please do not assume that there will be an insurance product available to protect you!  While the insurance industry has started to adopt some new coverage forms for people who rent out their homes, many insurance companies still do not offer any type of insurance protection for peer-to-peer renting of homes (or cars for that matter). The concept is simply too new. However, you should check with your local independent insurance agent to see what options are available to you.

Copyright © 2018 Central Mutual Insurance Company. All rights reserved.

3 responses to “The Sharing Economy: When New Opportunities Create Insurance Challenges”

  1. Thanks for sharing this helpful information. As someone in the towing business, this new concept of ride sharing or vehicle sharing is also interesting to me. If you are driving someone else’s vehicle and you get in a wreck, I wonder how the insurance coverage will apply. Many times a towing service is paid by the insurance company, but if someone doesn’t have coverage on another person’s vehicle, towing companies may have trouble getting paid.
    Ken –

    1. Marc McNulty, CIC, CRM Avatar
      Marc McNulty, CIC, CRM

      That’s a great point, Ken! I would imagine that the policy providing the physical damage coverage for the vehicle (whether it is through Turo or another rideshare service) would cover this but I can certainly see where a potential coverage gap could occur.

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