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GUARDHOG is an MGA that provides usage-based insurance cover for the sharing and gig economies.

The business gives sharing/gig economy platforms the ability to integrate its insurance products. If a platform user connects GUARDHOG’s cover to their personal account, the insurance is switched on and off automatically.

GUARDHOG’s main market is the short-term property (accommodation and spare space) market and its core policy, HostCover, provides the additional cover needed by those sharing their home to guests. A new monthly home and contents policy is being launched today. It recognises on the one hand the existence of the Airbnb guarantee, but also its limitations.

GUARDHOG has two other sharing economy products: TaskCover, which provides protection when undertaking short-term work; and StorageCover for possessions stored with third parties.

An earlier product, StuffCover, for insuring assets when loaned or rented out, has been stopped due to the immaturity of the sector.

GUARDHOG has now partnered with around 350 sharing economy platforms and is fully integrated with over 15% of them. Sites include Hostmaker, Airsorted, Lavanda, Stasher Stashbee, Shepper, Foxtons, Homelink, Mypropertyhost, HomefromHome and Aplacelikehome.

Creating strategic partnerships with the sharing economy platforms is critical for GUARDHOG – 90% of policyholders have come from these deep partnerships.

The revenue model is based on commission and profit-share on polices sold. Capacity is provided by Hiscox, RSA, UK General and Canopius.

Founded in 2016, the London-based business is now closing its first funding-round. They are being supported by startup incubator Hambro Perks and are hoping to close by the end of the year. The investment will help fund further product development and support its planned expansion into mainland Europe with the establishment of an EEA-regulated entity due to be completed in the first quarter of 2019.

The business has 6 FTEs with plans to double this in the next 12 months.

The Oxbow Partners view

Glass half full

The sharing economy is where it’s at. A 2017 report by Mastercard estimated that global shared transportation and accommodation revenues would increase from c.$100bn to c.$500bn from 2015 to 2020. Insurers are salivating over the new risk pools – or petrified about the impact of sharing on traditional revenue pools like personal motor or hotel property portfolios.

Multiple startups have sprung up to service this new demand. Aside from GUARDHOG, Impact 25 Member Zego (Bitesize) is focusing on insurance for sharing/gig propositions related to mobility and delivery; and Dingy and Tapoly are providing insurance for freelancers.

Some insurers have also updated their propositions for the demands of the sharing economy – broadly the need to cover assets that move fluidly between personal and business use – for example Admiral as an early mover in 2016.

Owning the digital interface

In our recent report on the impact of technology on the specialty insurance market (published for the Lloyd’s Market Association), we noted that ownership of the ‘digital interface’ would be critical in volume lines in the future. In other words, value will accumulate with those who connect seamlessly into the technology of distribution partners.

We think that InsurTechs are advantaged in owning the digital interface for three main reasons.

First, given that InsurTechs are small, it’s possible for an individual distributor integration to be needle-moving in a way that it cannot be for an incumbent. That means that the startup’s focus will be greater than that of an incumbent and they are likely to outcompete them for these early-stage partnerships.

Second, to quote Rod Johnson, Transformation Director at RSA: “companies that can move fast and be agile are those which are either extremely confident or which have nothing to lose.” Startups are arguably both of these things, whereas corporates are less willing and able to experiment with partnerships. Startups will get things done quicker, and the digital interface does not currently require ‘enterprise grade’ solutions.

Third, InsurTech founders are not constrained by existing technology to deliver these integrated propositions. This also helps them move faster – as Hokodo (Bitesize) builds its API ‘gateway’ for its distributors without the distraction of working out how it works with their existing policy admin systems.

Glass half empty

One word of caution for those excited about the sharing economy is, however, what the true insurance demand is likely to be. Some time ago we segmented the different types of sharing economy proposition and considered the likely propensity of one of the (normally) three parties to buy insurance – the platform provider, the service user and (sometimes) the service provider. (Sometimes the platform owns the service – for example city bike rent schemes, in which case there are only two parties.)

We concluded that insurance was likely to be purchased when a physical asset was involved (e.g. lending my car to a stranger, sharing my hedge clippers with the street) and when mandated by the user (e.g. professional indemnity for freelancers). However, is it really plausible that a transcriber on Upwork (a gig economy platform) is going to buy professional indemnity insurance? Will someone jobbing as a part-time removals person buy insurance for dropping a TV? Maybe they should – but will they?

 

Whilst there is no doubt that the sharing/gig economy is exciting, insurers need to think carefully about where premium pools will realistically form in the future.

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Chris Sandilands

Partner at Oxbow Partners
Chris Sandilands, ACII is a Partner at Oxbow Partners. Chris advises (re)insurers and brokers on a range of strategy topics and M&A. Chris started his career as a D&O underwriter at Munich Re, before joining Oliver Wyman, the consulting firm. You can reach him at csandilands@oxbowpartners.com.

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