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June 21, 2023

The complete guide to micromobility insurance

Brandon Schuh is an expert in product & general liability and sharing economy risk management. With a B.A. in Pre-Law from the University of Minnesota and a CLCU designation, Brandon's specialties include consumer products, sharing economy, micromobility operations, risk management, manufacturing, sporting goods and captives.

The micromobility and mobility as a service (Maas) industries are continuing to expand, but not without a few growing pains. While the concept of bike-share and scooter-share companies is fundamentally great, especially in densely populated urban areas, they have also faced their fair share of challenges over the past few years.

For every benefit they provide (environmental, economic, maneuverability, etc.), there seems to be a new issue that arises to counter it (be it legislative, macroeconomic, or public image-based). While bad press can certainly contribute to a slower adoption, it's evident the space is going to continue evolving, and no amount of "back in my day" skepticism will prevent that.

So without further ado, let's dive into the world of micromobility. And be sure to read to the end for our tips on securing the right coverage for your MaaS business.

What is Considered Micromobility?

Micromobility vehicles are lightweight vehicles like bikes and scooters, especially electric ones, used for short-distance (or last-mile personal) transportation. On a broader level, there are many other vehicles that fall under the micromobility umbrella, including everything from unicycles and electric trikes to cargo bikes and self-balancing boards. But for the purpose of this article, we'll center our discussion around electric scooter insurance and rental companies in the sharing economy space.

The State of the Micromobility Industry in 2023

The micromobility industry grew exponentially during the pandemic. Even when shutdowns were taking place across the country, cities were jumping on the electric scooter-share bandwagon to keep up with the incredible demand.

Now, as life returns to a more traditional—albeit adjusted—status, that demand isn't as strong as it once was. And thanks to the current state of the economy, the MaaS industry is facing significant macroeconomic issues that have plagued the entire startup space. Where growth was previously the primary driver of investment, a higher interest-rate environment has made future-promised returns less appealing, and venture capital firms have been keeping more powder dry.

The industry as a whole is also facing a barrage of publicity issues. The pandemic was an unusual time—for many reasons—the least of which was the huge drop in both vehicular and foot traffic. Now that people are back to exploring urban areas in greater numbers, commuters are inevitably at risk for more accidents. And the sad truth is, electric bike and scooter users are much more prone to fatalities than drivers of motor vehicles.

To help lessen the number of accidents, cities around the country are investing in infrastructure improvements such as new bike lanes, more dedicated green areas, reduced vehicle traffic initiatives, and increased production of electric vehicle charging stations.

With all of those concerns in mind, McKinsey & Company is still predicting that the micromobility industry could be worth $500 billion by 2030, indicating that the space isn't going anywhere.

Structuring Your Micromobility Insurance Program

Like most industries with a higher claims frequency and a higher propensity for serious accidents, the insurance marketplace is limited. Since the first shared scooter was underwritten in 2018, the market has learned a lot of lessons that have further dictated how insurance is approached in the micromobility industry.

We are in an incredibly difficult insurance market with increasing reinsurance pressures. Broker relationships, creativity, and operator risk-taking are crucial to securing an insurance program.

Most cities now require liability limits between $5 million and $10 million, and unless you are one of the larger names in the industry, some of the jurisdictional insurance requirements can be a large financial burden. Finding a way to buy insurance in a more creative way can reduce the cost of your premium.

How, exactly, can you take a creative approach to your insurance?

  1. Consider defense costs. This includes how they apply and if they erode the limit of insurance or are outside the limits.
  2. Be willing to take some risks. You have to have a little skin in the game. So ask yourself, How much risk, as an operator, are you willing to take and where are you going to take that risk?
  3. Determine where the carriers are playing. Knowing who does what in the insurance tower is really important. Some carriers have a larger emphasis on tactical considerations and "blocking and tackling," while others have more emphasis on collateral and financial capabilities.

Other Coverages

The basic coverage needs of traditional companies still exist—particularly if they are using venture money and are backed by investors. Management liability and executive risk lines of coverage are about the only normal insurances not impacted by businesses with shared small electric vehicles as their business model.

Liability insurance was once the hardest to place. Now, auto liability (for rebalancing efforts) and workers' compensation have become increasingly challenging.

When it comes to insurance for electric scooters, there is really no "easy" coverage, for two reasons:

  1. Rebalancing is tough. It requires a crew to use a van or box truck to go out and move scooters back to high-trafficked areas. This can lead to lots of auto accidents, back strains, slips and falls, abrasions, contusions, etc.
  2. Finding employees is challenging. In many industries, especially in the gig/shared/digital economy, finding employees is really challenging—and the people you do hire could potentially have a big impact on your company's loss history.

What Makes an Exceptional Underwriting Submission?

This is the million-dollar question. The best way to ensure a good submission is to provide high-quality data.

Here are a few of our top tips for drafting a strong underwriting submission:

  1. Utilize an investor deck to kick off the submission. Include your vision, differentiator, technology, and safety mission and measures.
  2. Choose a niche corner of the market or target something specific. The market is much more saturated than it was a few years ago, so penetration requires a specialized differentiator—especially if you're trying to break into that top tier. There are plenty of paths to winning, but underwriters like to see something that will work—and so do the investors!
  3. Include traditional data like claims, loss runs, previous policies, financials, mileage projections, etc. Those details are the number one need and eventual rating basis for your policies.
  4. Get to know your underwriting team. One of the best ways for an underwriter to get to know the risk is by getting to know you, the client. In addition to talking about the policies, have conversations with them about who you are and what you're trying to do.
  5. Think through the entire process. Proactively protect your company, and in the event of litigation, know how you'll respond. Partnering with an experienced law firm to establish these risk management steps is a smart idea.
  • How are you going to handle claims?
  • Who is your legal representation?
  • How are those and other areas of risk management being taken into consideration?

Securing Micromobility Insurance with Christensen Group

All of this might seem overwhelming, but we can help you navigate all the challenges and surprises that come your way. After all, this is a strategic partnership that requires collaboration and creativity between client and broker.

Please reach out to our sharing economy team of micromobility insurance experts to begin the process.

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