The sharing economy concept
Sharing economy, also known as collaborative consumption, is a trending business concept that highlights the ability (and perhaps the preference) for individuals to rent or borrow goods rather than buy and own them. (Have a look at Episode five of The Insurance Apprentice 2017 to get a better idea of the challenges around insurance in the sharing economy space).
A recent report by Lloyds of London suggests that there are some issues to iron out when it comes to the whole sharing economy concept.
The nitty gritty
In the introduction to a recently published research report, Vincent Vandendael – Chief Commercial Officer at Lloyd’s – said that in the insurance industry, the foundations of trust are built on a promise to pay valid claims in the event of a loss.
Upholding that promise over centuries engenders confidence and credibility – the lifeblood of any insurers market. Understanding the foundations of trust in the shared economy, and the potential threats that could upend it, is critical to the continued growth and success of this disruptive sector.
Vandendael points out that there are a few challenges that are associated with a shared economy. One is quite simple, consumers expect to be protected when they use or share services.
Research by Lloyds shows that 97% of clients believe that sharing economy platforms provide some sort of protection for users and providers. A further 45% of clients assumed there was insurance coverage, while 27% looked in detail to see if there was any insurance coverage in place.
Finally, 73% of clients had a level of expectation around insurance protection.
Not as it seems
While there are specific expectations when it comes to insurance coverage in the shared economy space, there is not always sufficient covers in place. Lloyds feels that this is a significant untapped market.
A massive 78% of product or service providers said that they would get more customers if the platform offered insurance solutions.
Perhaps the sharing economy is not as big as we thought it was. Lloyds reports that only 16% of the 5 000 consumers that the company surveyed reported having shared a product or service through the sharing economy.
The report added that of those that have not shared anything over the sharing economy, 70% said they would be more likely to share an asset or service if they knew it were protected by insurance.
More people sharing means more potential revenue for sharing economy companies.
Shared risks, shared rewards
One of the characteristics of the sharing economy is that there are both shared risks and shared rewards inherent in the industry.
The Lloyds report points out that redrawing the boundaries between employer, employees or contractors, and customers creates a new risk landscape with many untested assumptions around who should be managing these risks and liabilities.
The report adds that most people engaging in the sharing economy face risks and the regulatory position of who is ultimately responsible for these risks can be uncertain.
The report adds that a 2017 European Commission study into sharing economy platforms
found about six out of ten consumers did not know who is responsible when something goes wrong, what the responsibility of the platform is, or whether they have a right to compensation or reimbursement.
At the same time, a large majority of these consumers found it important that platforms are clear and transparent about who is responsible when something goes wrong.
It gets personal
There are a lot of personal concerns when it comes to the sharing economy.
The Lloyd report points out that consumers of sharing economy services worry about perceived risks to personal safety, the lack of guarantees around the maintenance of facilities, and the quality of services and protections if something goes wrong compared with the known remedies and protections offered by traditional service providers.
Providers of assets or services on sharing economy platforms worry about theft of or damage to their assets, agreements falling through more easily than with traditional services and potential liability for customers. In addition, there is contention around providers’ employment status and protections.
Editor’s Thoughts:
There are systems and controls in place to ensure that clients are protected from the major risks that are inherent in this market. However, this does not absolve insurers from putting in additional measures to protect clients. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
