The increasingly widespread practices of the collaborative economy, such as sharing cars in cities, require flexible insurance that allows users to get intermittent, on-demand cover, only when they want it

“Why go through the hassle of buying a car when you only want to drive?”. This very simple question is the advertising slogan of Share Now, the joint venture between car2go and Drive Now, which has 850 electric cars in Madrid (and another 2,000 in Paris, Amsterdam and Stuttgart) available to anyone wanting to book them through the mobile app.

This is commercial car sharing: vehicles parked on the street, pay per minute and short journeys, and urbanites from all over Europe are already familiar with it.

In Madrid, three others are added to Share Now – Emov, Zity and Wible that, contrary to what is happening with urban development, are extending their use beyond the city. The greater autonomy of batteries enables it, and prices are truly competitive.

Ride sharing also tends to be referred to as car sharing. It is the practice of sharing a trip with other users in one individual’s car – through platforms like Blablacar – but the urban commercial model is the one that has been most prolific in recent years, and it is a trend that is continuing to grow.

According to a survey on mobility in the future by Europcar Mobility Group Spain, 70% of drivers in Spain believe that letting go of their private car and opting instead for shared use is a valid alternative. Increasing environmental awareness, the possibility of driving and parking without restrictions in big cities and the savings (on petrol, insurance and maintenance costs) are compelling reasons that are convincing more and more drivers, especially those in urban settings.

As well as cars there are motorbikes, bicycles and scooters. The technology for the collaborative economy has, in recent years, led to a paradigm shift in urban mobility, just like what happened in the past with holiday accommodation.

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On-demand cover

As there ought to be no driver or car without insurance, insurers have been faced with the need to provide a rapid response to these new trends in driving.

On the one hand, they must cover the operators who own the vehicles, who require drivers to pay up to €500 in the event of an accident that was their fault. On the other hand, they need to cover the drivers that will make car sharing their main means of getting around. And it is here that the challenge of customisation arises – “pay per use” policies, also known as “on-demand cover”. In other words, people will have the freedom to insure themselves for shorter periods of time when they want to and where they need it, and not pay the premiums when not required.

Some startups are already on the trail of on-demand cover, either devising their own services or providing technological solutions to the big insurers. In Spain we are already seeing specific insurance for frequent car share drivers with premiums of €30-€70 per year depending on whether they just drive cars or motorbikes as well, and whether they have accident cover or not. But flexible premiums, dependent on use and quality of use, are an issue that has yet to be resolved.

The collaborative economy in general and car sharing in particular require formulae that will convince users and technology that supports them, so it is a field full of opportunities for insurtech entrepreneurship. Especially to give service, agility and versatility to large insurance companies, which, in turn, are partnering with platforms and operators of shared services.

It is also a breeding ground for agents and brokers who will connect insurtech startups with the large insurance companies. The executive director of the British Insurance Brokers’ Association, Graeme Trudgill, believes that these agents are the main mechanism for the development of the collaborative economy. The first ones off the mark will enjoy a competitive advantage over others.

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