Corporate Use of On-Demand Cars: How to Minimize the Risks

The sharing economy has created new solutions to old problems. Now, if you need a car for a quick errand, you can borrow one easily – without all the hassle and expense normally associated with rental cars. These on-demand cars can be used by businesses as well as individuals. But before you allow sharing economy expenses at work, make sure you understand how to minimize the risks involved.

How On-Demand Cars Work

By now, most people are familiar with ride-share companies like Uber and Lyft. In this model, individuals use their personal vehicle to give customers rides. The car-sharing model differs in that customers borrow cars to drive themselves. It’s more like a rental service than a taxi service.

Multiple companies, including Zipcar and car2go, have emerged up to provide this service. Although the details can vary from company to company, it generally works something like this:

• First you have to join the company. There may be application requirements.
• Once your membership is approved, you can book cars at an hourly rate for short trips or at a daily rate for long trips.
• Vehicles may be located in convenient spots around the city.

This has proven to be an attractive option for people who don’t want to deal with the hassles and expenses of car owners but do want occasional access to a vehicle.

It’s also an attractive option for businesses that don’t want to purchase company vehicles but do need to provide cars to employees occasionally. The on-demand cars could be used to make deliveries, transport clients or pick up supplies. Vehicles could also be made available to employees on business trips.

The Hidden Risks

Car-sharing services are convenient, but this doesn’t make them risk-free.

Because the cars are owned and maintained by another company, your business has no control over the condition. A car could break down, for example, or fail to start in the first place. It could be dirty or parked in the wrong location. Any of these problems could interfere with the work you’re trying to do.  

Another risk stems from the possibility of accidents. Many people might assume that because car-sharing companies often provide some insurance, and because the driver does not own the car, there’s no real liability. Unfortunately, this might not pan out if an accident occurs. Policy limits and exclusions could make the car-sharing company’s insurance insufficient. If that happens, the driver’s employer – your company – could be held responsible for any damages.

Minimizing the Risks

Car-sharing offers many benefits, but companies should not pursue it without taking steps to minimize the risks involved.

• Do your research before signing up for a car-sharing process. Check reviews and try to talk to others who have used the service. This can alert you to potential problems with the company.
• Create clear policies about when and why the cars can be used and monitor bookings. Don’t let unauthorized drivers use the service.
• Don’t assume that the insurance provided by the car-sharing company will be sufficient. Talk to your insurer about additional coverage.

For additional assistance in assessing your ever-evolving corporate risks, contact Heffernan Insurance Brokers.