What Makes or Breaks Startups in the Sharing Economy? Insurance Rates

As recently as last year, it wasn’t clear that RelayRides’ business made financial sense. The company, which lets strangers rent one another’s cars, was growing — acquiring rivals like Wheelz and expanding into new markets. It was charging its users a healthy vigorish; car owners paid the company 25% of every rental fee, while renters kicked in an additional 15%. (Most digital marketplaces only take a total of 10-20% of every transaction.) And yet, the company was still losing money on every transaction. The culprit? Insurance.

Source: Wired