Insurance still getting to grips with the sharing economy

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Complex risks such as car sharing or swapping homes for a holiday complicate the collaborative economy

A meeting that took place in 10 Downing Street in the summer to find solutions to problems in the sharing economy is a clear mark of the sector’s growing significance.

Among those in the corridors of power at the time were the British Insurance Brokers’ Association (Biba), representatives of Axa, Bluefin and Towergate, and various other players in what is also known as the collaborative economy.

On any given day there are thousands of people around the UK who are participants in the sharing economy, and some may not even realise it.

Lift sharing, particularly where money changes hands, borrowing someone’s car for a fee or swapping homes for a holiday are examples of the industry at work.

Potential confusion

Following a government review into the sharing economy and the summer meeting, Biba, together with DAC Beachcroft, has launched a guide to clarify some of the insurance issues facing businesses and individuals.

The guide looks at the potential confusion around lift sharing scenarios where a motorist would need to add ‘business use’ to their policy if they share a commute with a colleague who is collected from a different location, or where they might need special ‘hire and reward’ cover if they make a profit for a shared journey.  

The document also highlights the difficulties a sharing business can face obtaining insurance to cover its members or customers if it has no insurable interest in the property, items or skills being shared. It adds that, even where insurance is found, the premium can be prohibitively high.

Graeme Trudgill, executive director at Biba, said of the sharing economy: “It’s a whole change in the way people are going about their way of life, particularly young people in the digital age.”

He added that whereas historically insurance was provided for an item belonging to a policyholder, now it is often about giving cover to someone for something they do not own.

According to Trudgill, at the beginning of the year not many people were talking about the sharing economy, but now it is being widely discussed.

“We are encouraging insurers and brokers to design more products that meet the needs of this sector,” he commented.

The Downing Street meeting was predicated on removing the barriers inhibiting growth in this area and Trudgill rejected any notion of the industry profiteering from innocent activities. Indeed it is the case that a liability could arise where a person charges somebody for a room who then suffers injury or financial loss after suffering ill-effects from breakfast.

Paul Hine, the director of Hine Chartered Insurance Brokers, was a little more circumspect about the prospects for the sharing economy.

He argued that it would be difficult to devise schemes to cover the wide-ranging needs of many different situations.

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Need for qualifications

With regard to whether brokers have the necessary expertise to advise customers, Hine continued: “I think for lift sharing your average broker generally would be reasonably competent and qualified. But for more complex commercial type arrangements, then brokers would need qualifications.”

David Williams, managing director of underwriting at Axa, was at the Downing Street meeting. He told Insurance Age that he sees a big opportunity in a still evolving sector but that one of the problems the industry faces is the lack of historical data and consistency.

Referring to another difficulty he termed as “contract conditions”, Williams warned: “If you want an insurance product, you’ve got to make clear who is responsible.”

 

He reflected that the insurance currently available in many cases was bespoke, one-off and expensive, and more standardised underwriting had yet to be achieved. Looking ahead to business levels in the sharing economy, Williams noted: “I’m not seeing lots now but I think there’s going to be sufficient to warrant a lot of insurance activity in time.”

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