New Law to Shape Car-Sharing Market in Washington State

Washington state Gov. Christine Gregoire signed two bills into law last week that break ground in legalizing the way car-sharing programs are insured and establish regulations that allow insurers to keep usage-based rating formulas shielded from public view.

​Paving the Way for Car Sharing in Washington

The newly signed HB 2384 effectively legalizes car-sharing services as a noncommercial enterprise so that drivers with personal policies can rent out their vehicles without any negative insurance repercussions; before HB 2384, private vehicle owners would have had their policies canceled if they were found lending out their vehicles for money.

Under the new law, damages to the vehicle while it’s rented out is covered by the car-sharing service’s policy and not the owner’s, allowing private motorists to keep their inexpensive auto insurance policies while still being able to make a little extra cash by loaning their vehicle through a sharing service.

But some trade advocates said questions still hover over who would ultimately be held responsible for collisions when car-sharing liability cases begin appearing in courts.

“Most [concerns] are based on the relationship between the owner’s insurer, the program and the renter,” said Mel Sorensen, an attorney for Property Casualty Insurers Association of America, in testimony about the bill. “A lawyer for an injured party must seek the best opportunity to make their client whole.”

Sorensen added that insurers, “will continue to work with other stakeholders and are optimistic that all concerns will be resolved.”

State lawmakers applauded what they called landmark legislation that opens up the car-sharing market and creates “an opportunity to lessen emissions and reduce fuel costs.”

“Most cars are only used an hour a day,” HB 2384’s supporters, including its sponsor Rep. Zack Hudgins (D-S. Seattle), said in testimony backing the law. “These types of systems seem to reduce miles driven. All of society is helped when people have more choices and more efficient use of resources. This may result in an incremental improvement for the environment.”

The policies car-sharing services use to insure the vehicles must provide at least $180,000 worth of liability coverage, and the owner would have options when it comes to whether comprehensive and collision coverage would be included.

The new Washington law comes after similar provisions were put on the books in California and Oregon.

​Usage-Based Rating Formulas Considered ‘Trade Secrets’

The rapidly growing market for usage-based insurance, also known as pay-as-you-drive, involves an insurer installing an in-car device that records driving data of policyholders, including miles driven, times of day driven and instances of hard braking and turns. Such programs are meant to more accurately identify and reward safe drivers.

HB 2361 dictates who can collect recorder data and what the data can be used for, and it legislates the secrecy of rating systems that usage-based services use in pricing formulas, allowing companies offering such services to keep their business models private.

The bill aroused concerns over patents of devices that enable usage-based programs. Progressive Insurance holds some of the few patents in the usage-based market but has yet to expand its flagship program, Snapshot, to all 50 states, with Washington being one of the few remaining states to lack access to the program. Some state administrators said the bill legislates protection of patents for devices but will allow Progressive a leg-up on competitors seeking entrance into the usage-based market.

“Many companies are interested in this type of product but are concerned that this type of bill will forestall their options. Insurers believe in competition,” Kacy Scott and Marta DeLeon, lawyers for the Washington State Office of the Insurance Commissioner (OIC) said in testimony about the bill.

“This type of insurance is a good idea,” the OIC lawyers noted. But they also added that “the bill limits protection to one type of product sold by one insurer.”

The state House approved both bills in 73-23 votes in February. The usage-based bill was approved by a 38-10 vote by the state Senate, which also passed the car-sharing bill on a 44-4 vote. Gregoire signed HB 2384 on March 29 and HB 2361 the following day.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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