Insurers need to ‘rethink’ sharing economy transfer options, says Lloyd’s

Insurers may need to go back to the drawing board to cover new risks arising from the sharing economy that typically sees peers offering services via online sites, say Lloyd’s and Deloitte in analysis of the booming sector. To address these new risks insurers must rethink traditional cover, the study by the two organisations finds. Lloyd’s head of innovation, Trevor Maynard, commented: “Sharing economy platforms have transformed entire industries because they have rejected the status quo and challenged the way we think about once-traditional goods and services. To effectively serve the sharing economy, we as insurers must follow that example and rethink traditional insurance products.” The study reveals that lines are blurred between whether consumers or service providers carry risk in the sharing economy. It concludes that the sharing economy is tricky to insure through traditional products because it “blurs the boundaries between personal and commercial lines”. Lloyd’s and Deloitte say risk management is at an early stage of development in the vast majority of smaller sharing platforms. The study shows examples of established risk management programmes in place at more mature platforms but states that the insurance industry should work closely with platforms to support growth. “The opportunity for sharing economy platforms and the insurance industry to work together is clear,” the report notes. The study focuses on real estate and finance in six key markets – China, United Arab Emirates, Germany, France, the UK and the US. It finds that a quarter of the total population studied has bought or rented services from peers using shared platforms during the past three years. Lloyd’s and Deloitte say this equates to 500 million people sharing assets or services in these six countries alone. The study finds significant variations between countries, with China emerging as the top market for shared economy services. About 73% of China’s online population are consumers in the sharing economy and 55% supply goods or services to online platforms. This is double the figure for the US and Europe. UK citizens used the sharing economy least, with only 9% of the population sharing a service in the past three years. Lloyd’s and Deloitte find that 57% of people who had provided services or lent products in the sharing economy in the past three years were insured via transaction or personal cover. Existing protection for sharing economy risks includes loss of possession, liability and damage cover. The study finds that several platforms have protection in place, ranging from transaction-embedded insurance to guarantee schemes. The survey reveals that 37% of home-sharers bought or upgraded buildings and contents policies, while 49% of ride-sharers bought new policies or upgraded to cover the additional risk. Among delivery drivers, 37% bought or upgraded insurance and 20% of freelancers bought or upgraded liability insurance. Nigel Walsh, partner at Deloitte Digital, commented: “In our market scanning, we’re not only seeing an increasing number of sharing economy platforms provide insurance to their users, including bespoke products through the Lloyd’s market, but also a large number of startups helping to solve the insurance gap for all participants in the sharing economy. “Equally, insurers are still in the very early stages of developing the dynamic and flexible solutions this sector needs as it continues to evolve at pace. The opportunity for sharing-economy companies and insurers to partner to reduce risk in this space has real implications and exciting opportunities for future growth,” he added.

Insurers need to ‘rethink’ sharing economy transfer options, says Lloyd’s

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