In our last article surrounding HyreCar Inc (NASDAQ: HYRE), we looked at the company as a whole, which didn’t give me much time to dial into what I believe to be the biggest value proposition associated with the company, it’s proprietary insurance product.
What Is This Proprietary Insurance Product?
While HyreCar makes money from service fees as both owners and drivers take advantage of their platform, their insurance product is the only one of its kind, and I believe it is overwhelmingly valuable. Here’s how it works:
When a driver decides to use HyreCar to acquire a vehicle for commercial purposes, the ride-sharing service or other service like it that the driver works for will general cover insurance while the car is being used for commercial purposes. For example, when an Uber driver starts a route to his or her customer, Uber’s insurance kicks in providing coverage for the car and driver. After all, rideshare services are required to provide $1 million liability insurance when a passenger is in the car. However, as soon as the customer is safely dropped off at their destination, the insurance becomes inactive. So essentially, when there is wait times between jobs, there is no commercial insurance being provided by the rideshare companies.
This creates a bit of an issue, especially when it comes to borrowed or rented vehicles. After all, the vehicle owner wouldn’t want to be stuck with damages caused by a driver, but if that driver isn’t insured throughout the entire time the driver is using the vehicle, that’s what could happen.
As a result, the company saw the opportunity to carve a niche in the overwhelmingly popular ridesharing industry. Not only would HYRE provide a way for prospective drivers to get their hands on vehicles in the community-to-community nature in which the ridesharing industry operates, it would ensure that the vehicles it helped to procure were insured at ALL TIMES.
In fact, the company works with American International Group Inc (NYSE: AIG), one of the world’s largest insurance companies, to provide the insurance that covers this crucial gap in the ridesharing industry.
The Insurance Feels Free To The Renter!
When it comes to turning this proprietary insurance into dollar signs, HYRE built the product right into the process of renting cars through its community-driven platform. However, unlike popular rental company’s like Avis Budget Group Inc. (NASDAQ: CAR) and Hertz Global Holdings (NYSE: HTZ), the insurance on rental vehicles is not optional. In fact, each driver has a $13/day insurance cost built into the cost of the rental, which HYRE has made sure to keep competitive in the rental car market. In fact, here are the going rates for rentals with the top rental company’s:
- Enterprise – Enterprise rents vehicles at a cost of $45 per day. Insurance costs will run about $14 per day, bringing the total cost of renting a car from Enterprise to $59 per day.
- Hertz – Hertz rentals run at about $50 per day with the same $14 per day insurance costs. This brings the total per day cost of the rental to $63 with HTZ.
- Budget – Finally, the going rate for a budget rental car is $40 per day with a $10 per day insurance cost, bringing the total cost of the rental to $50 per day with CAR.
When it comes to HyreCar, the pricing is different. The price for renting a car with HYRE is algorithm-based and will vary depending on location, supply, and demand. In general, the cost to rent a car with HyreCar comes to approximately $200 per week, which brings the cost of the rental to about $31.43 ($200 + 10% fee / 7) per day. So, even when adding on the additional $13 per day insurance cost, the total cost of renting a car with HYRE is generally below the cost of renting a car without additional insurance with big-box options.
The Potential Here Is Incredible
HyreCar has done something very interesting. Ultimately, the company has created a product that is in need in an emerging industry. However, through their asset-light model of sourcing cars , the insurance product feels free to the driver. Ultimately, even with the cost of the additional insurance provided by HYRE and underwritten by AIG, the average cost of renting a car through the service is lower than the average cost of renting a car without additional coverage with big-box options like HTZ and CAR. As a result, the company has the potential to become the leading option for Uber, Lyft, and other rideshare platform drivers.
Looking into the growing rideshare industry, the potential here is incredible. At the moment, Uber is adding hundreds of thousands of new drivers per month (Source)! Lyft is also seeing incredible amounts of new drivers getting involved in their platform. At the same time, a large amount of potential new drivers are turned away because they simply don’t have the type or quality of vehicle needed in order to drive. All of these additional drivers and prospective drivers are members of the audience that HYRE is going after.
In the most recent data provided, HYRE said that it had more than 175,000 driver profiles. Of course, driver profiles don’t always equate to rentals. So, let’s say that 50% of these drivers rent a car at least once per quarter for a period of just one day. That works out to $875,000 in quarterly revenue from the insurance product alone. At the moment, the company is growing at a rate of about 5.75 times on a year over year basis. Should this rate of growth continue, the potential revenue this proprietary insurance product could generate may become massive. In fact, at the current rate of growth and considering the estimated figures above, the HYRE insurance product could be bringing in nearly $30 million per quarter in just a couple of years.
At the end of the day, HYRE is a stock that’s simply hard to ignore. While the company is new to the market, and relatively small at the moment, recent growth shown by the company, combined with a proprietary insurance product that gives it the potential to compete with giants like HTZ and CAR, make this stock a potentially high-growth opportunity in the making!