The sharing economy describes models where assets or services are shared with others, usually for a fee. The sharing economy has grown enormously in the last 5 years: a 2016 report by PwC estimates that peer-to-peer accommodation, transport, on-demand household and professional services, and collaborate finance generated EUR4bn of revenues, facilitating EUR28bn of transactions in 2015. No doubt, the surge is fueled by “millennials”, who are accustomed to renting rather than owning assets (think Spotify and Netfix) – but, as this entertainingly geeky blog points out – the demographics of AirBnB users goes well into the 60s.
The sharing economy model is best established in the motor and home space (think Uber and AirBnB) – but stretches much further, for example logistics (Flexe), services (TaskRabbit), boats (Boatbound), equipment (Spinlister), pets (DogVacay), parking spaces (Parkatmyhouse) and many many more.
Some PwC research from 2014 estimated that total (global) revenue from the four segments mentioned above could reach USD335 by 2025.
One of the hurdles that the sharing economy has encountered has been insurance. Put simply, insurers have not, so far, adapted their product set to cater for the “mixed usage” of assets in the sharing economy. The classic example is Uber drivers going to their first pick-up (“period 2”): they fall between personal and commercial use.
The consequence is that many people who offer their assets within the sharing economy are uninsured or under-insured.
Some sharing economy businesses are responding to this “coverage gap”, either by offering guarantees or providing access to a real insurance product. Nonetheless, coverage gaps remain as the law is catching up: what is the duty of care of the sharing economy companies to their users, if any, and what, therefore am I covered for in practice? In short, sharers have few contractual protections and are to a large extent reliant on good faith of the sharing economy companies.
There is some good news, however. The number of insurers offering insurance to the sharing economy is growing. For example, Admiral has a Head of Sharing Economy and is building out its proposition. Unsurprisingly, a group of disruptive startups is also emerging. Look out for Safeshare, Slice Labs, Bungalow, Guild and Peers to get some ideas.
We aren’t convinced there’s a huge upside opportunity in the sharing economy for insurers (the pool isn’t getting bigger). However, inactivity will lead to a migration of the portfolio to insurers who can handle the complexities thrown up by the sharing economy. Insurers should update their proposition to make sure that the up with the times.
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