It’s good to share – we’ve been getting to grips with the exposures associated with the sharing economy. David Price, Director of Specialty, lays down the fundamentals
Ten years ago, if you were visiting either London, New York, or anywhere else really, you would have booked a hotel room or hailed a taxi. Today, it’s almost overwhelming the number of options we can now choose from, including Airbnb or HomeAway for holiday accommodation or indeed business travel, and Uber or Lyft for a journey. These companies, which have become household names, offer services on peer-to-peer platforms that have heralded the era of the “sharing economy”.
Crowd-based capitalism. Collaborative consumption. The gig, or on-demand workforce. Call it what you want, but the sharing economy is here to stay. By providing platforms to facilitate transactions, companies such as Uber and Airbnb have opened a floodgate of opportunities for people to earn additional income, or recast their career path.
Sharing is caring
A hugely exciting new way to live and work is now available to those who wish to participate – and millions of us do. Indeed, PwC has forecast the global sharing economy to grow to $335billion by 2025 from $15billion in 2014.
However, these opportunities present their own set of risks for participants and are creating interesting challenges for brokers and insurers alike. Most insurance policies for homeowners, renters, or personal vehicles, for instance, generally do not cover regular commercial activity, such as renting your home or using your personal vehicle to become a driver. In fact, sharing economy activities such as renting out your property for short-term holiday lets, are actively excluded under most standard homeowner policies.
When there is a loss not sufficiently covered by the sharing service providers, such as Airbnb etc, individual policyholders may be left to assume the risk, which could be substantial.
Distinct, but not impossible challenges
In trying to meet the new demands of the sharing economy, the insurance industry faces a number of distinct challenges that will require new approaches to doing business and supporting this exciting and developing innovation in our society. But it’s not rocket science – here are my four key takeaways:
- New sharing economy risks and exposures take time and effort and talented resource to understand and insure in a way that is cost-effective to clients.
- Traditional coverages don’t currently fit non-traditional risks. We either need to push the boundaries on traditional policies to get Insurers to extend coverage or we need to create new specific products
- At the same time, the risks and liabilities are all familiar. We’ve covered them before, just in a different way.
- It’s about doing what we already do, but through a different lens. I’m not saying it’s easy, because it’s not, but we don’t need to overcomplicate it either.
Quite simply, it is therefore our job to make sure we are developing pioneering risk transfer solutions that support growth in the sharing economy by improving resilience. At SSL Endeavour, we’ve been working hard on identifying the hurdles participants of the sharing economy and insurance industry face. Regulatory restrictions and pricing structures are certainly up there as the lines between commercial and personal insurance become increasingly blurred, but gaps in exposures is what we do best!
We have sought to address these challenges with a unique market offering, designed to fit the needs and challenges of those participating in the sharing economy.
Looking ahead, we must be ready for the next frontier of the sharing economy. Individual products aren’t enough – for forward looking insurers and brokers in this space, partnerships with peer-to-peer technology platforms will be key.
If we can’t get our arms around the new exposures presented by the sharing economy now, how will we be relevant for the future?
If traditional industries are getting knocked on their heads by the sharing economy, then we must take the same approach to our coverage.