By Christoph Watterott, Underwriting Manager Property Switzerland / Italy
Sharing cars would seem to be efficient. Why do you need your own private car to drive to work and back, and buy groceries two or three times a week? Or drive long-distance for vacation two or three times a year? What is the car doing the rest of the time, other than taking up valuable city space? A shared car replaces, on average, nine private cars. Shared cars could play a big role of reducing traffic jams and parking shortages in cities.
Smart phone apps already connect with shared-car networks to identify available cars and parking spaces in the area, and to track fuel usage. Eventually, those networks and apps will also connect with smart-city command centers, and communicate directly with city infrastructure.
Shared cars are generally not luxurious, but they can be. If you really have a yen to cruise in a Mercedes, some companies have one or two on hand. They just cost more.
However, currently even basic shared cars are not widespread or cheap enough to make them worth the headache for most people. As with public transport, making shared cars both profitable and affordable to consumers has been a challenge for businesses. Shared cars will have to be much more convenient before they become popular. Little shared-car clusters are typically found in airport parking lots, and at major train stations. Why not have them ready and waiting in apartment parking lots and at shopping centers? Why not allow customers to leave them wherever a shared space is available, rather than having to return them to the original space?
Although older generations eschew them, studies show that the rising urban generation is more willing to share a car. Is it the overall sharing influence of social media? Or is it because they are schooled to consider the environment a priority? Maybe the biggest factor is that they would rather not have to worry about taking care of a private car.
Generation Y should provide enough of a consumer base to help shared cars take off in the next decade. More widespread shared mobility will create more flexibility and an economy of scale, both in production, and on business ledgers. Shared cars will eventually be cheaper, easier and quicker to access, and more people will want to save money and time by using them.
However shared-car providers face risks similar to rental-car providers.
Are people as gentle to generic, shared cars as they are to their own dream machines? Definitely not. For that reason alone, property and casualty insurance on shared cars is high.
Shared cars also get a lot more use. That’s why shared cars only last three to four years, compared to an average of 11 years for private cars. They have to be replaced frequently. This creates waste and uses resources. Plus, car manufacturing emits greenhouse gases and other pollutants. However, pervasive car-sharing could drastically reduce traffic jams in cities, lowering emissions. This would probably tip the environmental scales in favor of sharing.
Shared car providers frequently charge extra for modern technological standards like GPS. As more private cars—especially driverless cars and drones—communicate with other cars, bicycles, the city infrastructure, and the city command center, shared car providers will need to raise the basic package standard. Otherwise, drivers who want to save money by leaving off their communications devices will at best find themselves at a disadvantage. At worst, they could be put at danger, or put cyclists, pedestrians, and other drivers in danger.
There will certainly be a transitional period before regulators demand that shared cars include this minimum technology. During that time, liability in accidents could be difficult to determine. We are still waiting to see how legislation addresses this question in smart cities. Will the shared-car provider be to blame for an accident with another driver who was just following city orders? Or with the driverless car or drone being guided automatically through the city? What about with a cyclist or pedestrian? In this interim period, it is also possible that insurance liability premiums could be reduced for providers who offer GPS and networking technology at no extra cost.
The chief risk for shared mobility is really that the business model will not succeed. It will be challenge for some time to generate a profit. Right now, risk engineers can advise providers on streamlining services to minimize risk. This will reduce not only damage and loss, but also the cost of insurance premiums.
Shared cars will become a core component of smart-city mobility in the next decade. But no matter how convenient and inexpensive they are, there will always be people who drive their own cars.
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