Carshare App Developers under Pressure from Russian Prosecutors

Usage-based insurance (UBI) helped Russian carsharing providers to escape embarrassing issues early in the game.

However, insuring the fleets remains a risky business. It is a matter of record how local providers were launching operations expecting responsible sharing and let their safeguards down. Naturally, that soon attracted mobs of the least responsible such as street racers and banned drivers. Competing for the customers during the explosive growth period in 2018-2020, the providers stayed for too long with this risky approach, said Adel Khaliullin, a researcher at the University of Prosecutor’s Office of Russian Federation, speaking at Urban Mobility Forum in Moscow late last year. In 2019, Moscow’s car-sharing fleets were involved in 4.5% of the town’s road accidents while comprising less than 1% of the town’s fleet.

In the insurance market, early sales of liability policies for carsharing providers came with loss ratios as high as 1,500%. In those days’ typical instance, AlfaStrakhovanie reported loss close to 120M rubles ($1.6M) and quit the segment. One by one, the insuring companies were leaving the market causing a stalemate situation for the providers: while continuing operations was impossible without mandated liability coverage, buying the policies was impossible itself.

A resolution to the dilemma came in the form of mixed pay-per-minute policies first introduced by Renaissance Insurance, balancing losses in liability claims with profits from other types of coverage. Thanks to that move, the company had since secured the top position, holding 80% of the country’s car-sharing insurance market. Thus, it’s safe to say that carsharing companies were the first road transport sector in the country to embrace UBI at full extent.

Calls to comprehensive measures

In August 2019, a 16-year-old street racer bought a hijacked carsharing customers’ account and caused a serious four-car collision in Saint Petersburg, heralding coming of illegal trade of stolen customer accounts.

Contradicting the providers’ claims of sufficient protection embedded in the apps, cyber-security specialist Kaspersky Lab reported finding numerous vulnerabilities in the software. “Inadequate security level of carsharing apps contributes to malicious access to consumers’ data,” said Khaliullin. “Hi-jacked accounts can be bought on the black market for prices ranging from 400 to 5,000 rubles ($5 to $70) depending on a user profile and amount of money in the account.” Buyers are, typically, those not eligible to drive and denied applicants with a bad driving record. In a number of other instances, the stolen accounts can then be used for criminal activities.

To offset these and other frequent wrongdoings, efforts by the providers or insurers are not enough, Khaliullin believes: “First of all, a clear division of liabilities of the app developers, carsharing providers, mobile network providers and users must be done at the legislative level.” It should be supported by industry-wide collaboration in areas such as promoting responsible behavior in consumers, introduction of an integrated user identification system and all-operator bans on blacklisted consumers.

The proposals sound the alarm for the insurers. Today, the insurers and providers exchange data to sort out dangerous drivers, said Sergey Demidov, head of motor insurance at Renaissance Insurance: “We share analytical data on the factors influencing accident rates. The carsharing companies use it to upgrade driver’s scoring models.”

However, legislation such as confidentiality and data protection regulation as well as trade secret requirements imposes limitations on these kind of cooperations, said Dmitry Korobeynikov, head of the department of fleet vehicle claims at Ingosstrakh.

Still low in security tech

The insurers witness how the carsharing sector, having faced financial and reputational losses, is sifting out the wrongdoers. Much of the visible achievements must be chalked up to fleet telematics. “Indeed, technological solutions do improve safety, especially those regarding risk-scoring models, driving claim rates down,” said Demidov.

Reflecting on the improvements, the insurers are now returning into the sector. However, much more changes are needed. A long list of promising technologies are still in early trials and not widely adopted, said Korobeynikov. To start a rent, the majority of providers do not subject a renter to any facial and audio identification procedures. To start driving, a customer needs to merely log into an account using a mobile device.

Meanwhile, such biometrical procedures combined with cabin surveillance can effectively counteract usage of stolen accounts, he thinks, as well as illegal driver substitutions and vehicle vandalism. Introduction of trial periods and speed and range limits for new customers could also prevent some of the most serious accidents. However, sometimes it’s a mere awareness of the customers about policy terms such as the deductible that makes the difference, he also remarked.

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