Sharing economy offers opportunities for insurers
According to GlobalData, the sharing economy is continuing to show impressive growth, and there is plentiful opportunity for insurers to take advantage of it
It’s one of the most seismic ongoing changes of the modern era – the so-called sharing economy, a system within which private individuals share assets and services in a much more direct and connected way than would have been feasible (or imaginable) in the days before bountiful internet and smartphones. Insurers have been caught somewhat on the hop with this, rushing to keep up and adapt their services, products and processes, and many have been successful – but, says research and analysis firm GlobalData, coverage gaps still exist within the sharing economy, and canny insurers can exploit these.
“Companies such as Airbnb and Uber have largely revolutionised the hospitality and transportation industries, but their quick growth has posed challenges to insurance,” said Beatriz Benito, Senior Insurance Analyst at GlobalData. “Typically, the industry had distinguished between personal and commercial products, but the sharing economy blurs the lines. Marketplace platforms are enabling consumers to share their belongings or services for commercial activities.”
Insurers, Benito went on to say, have responded to this challenge in different ways. “[Some] have responded by creating add-on solutions to complement existing policies,” she said. “For instance, several insurers now offer ride-sharing endorsements that can be added on to the driver’s personal policy. That way a driver using their vehicle for commercial undertakings on an occasional basis through the likes of Uber and Lyft can be covered, avoiding the larger premiums associated with commercial policies. Others have developed standalone, on-demand products that can be switched on and off as required from an app. However, there is still ambiguity surrounding the level of coverage, including questions as to when it actually starts. While legislation is bringing some clarity into this, there is still some way to go.”
Globally, the insurance industry turned over US$6.2 trillion in premiums in 2018, but a not insignificant portion of this share – and one that will grow over the next few years – relates to emerging models, including that of the sharing economy. And GlobalData warns that insurers that do not adapt, or who are unable to move with the agility of smaller insurtechs, will be left out in the cold.
“Consumers are bound to continue using sharing economy platforms,” said Benito, “incentivised by greater accessibility and more attractive prices. This signals that there will be new opportunities for insurers in other emerging models – for instance, the sharing of e-scooters as a transportation method is gaining traction in several countries. Insurers will be required to develop their products, but the rapid success that the sharing economy has had so far should continue encouraging the industry.”