Thursday, August 23, 2007

Zipcar chases college students

From yesterday's Wall Street Journal: Zipcar goes to college. Darren Everson writes:

    Traditional rental-car companies largely avoid the student market because of concerns about liability. According to the Insurance Institute for Highway Safety, the crash rate per mile driven for 16-19-year-olds is four times that of drivers 20 and older. Companies seek to mitigate risk through surcharges and higher minimum age requirements. Hertz's minimum age is 21 in all states except Michigan and New York, where it's 18; Hertz renters under the age of 25 are also subject to an age differential charge. Avis Budget has a minimum age of 21 in most locations and has a $110 per day surcharge in New York state for renters 18 to 24.

    The car-sharing companies, by contrast, are aiming to manage their risk by requiring that 18-to-20-year-old applicants have two years' driving experience and a clean record, and that they be a student at a participating school. There are no additional fees or deposits, although Flexcar also requires parental consent and a copy of the student's current auto-insurance policy showing the policy's limits. Flexcar requires that 18-20-year-olds have $300,000 of additional liability coverage. But otherwise, insurance works the same way for 18-year-old car sharers as it does for older ones: In an accident, the car-sharing company's insurance covers the cost except for a $500 deductible, which applies if the member is at fault.

    The car-sharing companies believe they can tap into the younger market safely because of their business model, which allows them to screen customers by their driving record, and because of the clientele. "The reason we see a difference is because we're a membership-driven system," says Scott Griffith, president and chief executive of Zipcar.

Zipcar's main competitor on campus is Flexcar.

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