The fine follows a cease-and-desist New York legislators sent RelayRides in April 2013. The state said that insurance companies could not exclude renters from a car owner’s policy — something RelayRides promised in a statement on its website claiming that “if something unfortunate does happen while your car is being rented, your insurance policy should not be touched.” New York’s lawmakers argued that these false advertisements and the insurance issue broke the law and put renters at risk, so they forced RelayRides to suspend its service.
“Our administration will not tolerate when companies break the law and jeopardize New Yorkers’ safety,” New York Governor Andrew M. Cuomo said in a statement. “We will continue to take an active role in protecting consumers by preventing false advertising and misleading business practices.”
RelayRides spokesman Steve Webb offered the following comment in response to Pando’s inquiry:
We have been actively working with State officials to bring peer-to-peer car rentals back to New York as soon as possible. As part of the process to bring back peer-to-peer car rental and all of its benefits to New York, we introduced legislation at the end of last year’s legislative session.
Webb also pointed to a blog post written following the cease-and-desist, in which RelayRides CEO Andre Haddad said:
Innovation, by its nature, does not always fit within existing structures. Although we’ve been careful to ensure the protections offered to our member community comply with legal frameworks around the country, we learned in conversations with the NY Department of Financial Services that it believes there is noncompliance with certain unique aspects of NY insurance law.
Pando weighs in
Pando alum Richard Nieva covered RelayRides’ New York woes last April:
RelayRides, which allows consumers to list their cars on an online marketplace to rent out to strangers instead of letting a car go unused, has said that consumers would not be responsible for out-of-pocket expenses if cars are stolen or are in accidents. The investigation is ongoing, and the state has demanded RelayRides provider, Hudson Insurance Company, turn over all information about its business dealings with RelayRides.
Nieva then wrote about the effect RelayRides’ cease-and-desist might have on other car-sharing services:
Paul Mang, a partner at Illinois-based Avarie Capital and former partner at the consulting giant McKinsey and Company covering property and casualty, says New York State’s cease and desist could possibly make discussing car-sharing less of a priority for insurers.
He’s had talks with executives at the ‘top 10 to 15 or so’ large insurance companies, who have told him that the discussion of car-sharing is on those companies’ agendas. Now is the time of year, he says, when companies usually do offsite meetings to focus on what they will be doing in the next year. Recently C-suite executives are at least engaging the topic. ‘It’s hard to get anything on the agenda, whether it’s formal or informal,’ Mang says. ‘That’s an important step. If it’s not being discussed at all, it’s hard to get resources.’
Then Nieva reported on the insurance industry’s relationship with the services:
If you take a step back, [the] tension between the insurance companies and car-sharing folks is a bit counterintuitive. There’s nothing more risky than true disruption. And guess what industry loves risk? Like, loves it more than anything in the world? The insurance industry. The caveat: Insurance companies only like risk they can understand. And right now, they are still too floored by this whole thing to wrap their heads around it.
[Illustration by Hallie Bateman for Pando]