The mass move to home working is causing a divide between personal and commercial insurance coverage that insurers are unable to solve because of system problems.
According to digital insurance platform EIS, insurers are struggling to define their products as the lines between professional and domestic continue to blur.
While there are a growing number of people working in converted sheds, summerhouses and garages, any effort to design suitable policies have been hampered by outdated and siloed technology, creating a potential coverage gap.
While some workers may be covered by their existing home insurance, others are being asked to either increase their premium or buy a new commercial policy.
“These last two options will leave customers disappointed and frustrated with insurance carriers’ efforts to secure reasonable pricing,” said Anthony Grosso, head of marketing and communications at digital insurance platform EIS.
“However, insurers themselves will be equally frustrated with their [inability] to provide fair pricing,” he added.
This issue is indicative of a wider problem for insurers, which are held back by legacy systems that are siloed into one line of business, unable to comprehend insurance risk when lines are blurred between personal and commercial.
“It’s a growing problem for insurers, which has been evident throughout the pandemic, as the lines blur in tandem with how workforces are diverging from the 9-5 office day to a wide array of work setups,” said Mr Grosso.
This is proving difficult not only for workers but also their employees, particularly those that have announced a formal move to home working, either allowing all their staff to work from home for the foreseeable future or else moving to a 60/40 split between home and office workers.
Mr Grosso is calling on insurers to update their systems and to use more digital technology, such as APIs and cloud platforms, that can allow for more dynamic and innovative insurance products.
“To navigate the blend of commercial and personal risk, insurers need more customer-centric systems, which fairly price home and motor use based on actual usage and an accurate evaluation of the risks posed,” said Mr Grosso.
“These systems move beyond legacy and modern legacy, to technology that is AI-enabled and more open to data, enabling policies to be configured and priced accurately to fit the risk,” he added.
There are precedents, said Mr Grosso. He pointed to the example of CSAA in the US, which provides auto insurance for Lyft drivers that can switch between personal and commercial use through an app.
It remains to be seen whether the same kind of technology can be applied on a larger scale, for example to cover an employer’s whole staff when working at home, as opposed to a single self-employed Uber driver.
Addressing these system issues may also help insurers to overcome a lack of innovation that has been noted by both consumers and insurers themselves.
Research published by EIS in November 2020 revealed that 60% of insurers do not consider their own products to be innovative, while 72% of consumers in the UK want more digital insurance services.
A lack of innovation has also been a longstanding frustration among corporate risk managers and insurance buyers, exacerbated by the perception that there is greater evidence of digital technology within personal rather than commercial lines of business.