Please, Sir, May I Have a Policy?

Home- and car-sharing startups struggle for coverage | “It’s hard for baby boomers to get their head around this”

Noah Buhayar

Entrepreneur Debbie Wosskow created a website she describes as “online dating for homes.” Through her London-based Love Home Swap, a couple in Manhattan can swap their classic-six prewar apartment for a villa in Zanzibar for a week. For Wosskow, finding more than 5,000 property owners in 95 countries willing to hand strangers their house keys has proven easier than getting an insurance company to write her a policy.

After contacting about two dozen insurers, Wosskow struck a deal for coverage starting in September — but only for properties in Europe. The policy, underwritten by Hiscox, will protect against property damage and last-minute trip cancellations. That means about two-thirds of homeowners have to arrange their own or go without. “It’s a nightmare,” Wosskow says. “The insurance industry as a whole has been painfully, and I emphasize painfully, slow to react and offer relevant services.”

Online startups that help people rent their houses and cars to strangers have mushroomed. Yet many entrepreneurs are having a tough time convincing insurance firms that they’re worth the risk. One obstacle may be the generational divide, says Paul Mang, a partner at Razor’s Edge Consulting who previously led part of McKinsey’s property-casualty insurance practice. “It’s hard for baby boomers to get their head around this,” says Mang. “Why would anybody rent out their car for $5 an hour?” Another challenge: These new businesses want insurers to blend elements of policies tailored to individuals with those that apply to companies, Mang says.

For Getaround, a San Francisco-based outfit that helps car owners rent their vehicles, the search for coverage took more than a year — and required a shift in the business plan. Chief Executive Officer Sam Zaid says he contacted between 60 and 80 carriers and, at one point, resorted to cold-calling insurance executives he found on LinkedIn. Getaround, which counts Yahoo! CEO Marissa Mayer among its investors, initially planned to offer its service on university campuses, but some carriers balked at insuring a pool of students, says Zaid. So the startup shifted its focus to cities.

An insurance wholesaler eventually put Getaround in contact with Warren Buffett’s Berkshire Hathaway, which in 2011 agreed to underwrite an annual policy for liability, collision, and theft during a rental, but only after a three-month trial run. “We definitely pay a premium still, given the early nature of the industry,” says Zaid, who like other entrepreneurs declined to disclose his company’s insurance cost. “Paying a premium to get a company like Berkshire felt like the right trade-off.”

The fledgling sharing industry got a wake-up call in February, when a car that was rented through a service called RelayRides crashed in Boston, killing the driver and injuring four people in another vehicle. The startup has a liability policy with a $1 million cap; damages could exceed that amount, says Jonathan Karon, a partner at Karon & Dalimonte who represents one of the injured people. “Almost any other car on the road would have” had only “a fraction of the million-dollar coverage available for this claim,” Alex Benn, RelayRides’ vice president of business development, said in an e-mailed statement. “This tragic incident is an outlier from our many thousands of reservations.”

A San Francisco resident came back from a trip last year to find her apartment vandalized after renting it out on Airbnb. After the incident, the Bay Area company signed up with Lloyd’s of London to cover all bookings on the site for as much as $1 million in property damage in countries including the U.S., Germany, and Australia. Airbnb has booked more than 10 million guest nights since its founding in 2008, and incidents like the one last year are “incredibly rare,” said spokeswoman Emily Joffrion in an e-mail.

Beth Leri, a spokeswoman for Lloyd’s, declined to comment, as did Hiscox’s Alyssa Daskalakis. Berkshire didn’t respond to a request for comment left with Buffett’s assistant.

Prices for coverage should come down as sharing becomes more common and insurers accumulate data, says Getaround’s Zaid. The startup sends Berkshire a monthly report and sometimes has conversations to clarify policy terms, such as when a car owner in the Bay Area asked whether he could list his DeLorean. The stainless-steel sports car was of 1980s vintage, while Getaround’s policy requires that cars be model-year 1995 or newer. Berkshire’s response, according to Zaid: No problem.

The bottom line Insurers are shunning sharing sites because they require coverage that blends elements of individual and business policies.


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