During the snowstorm that hit the east coast in January, I took some time to clean up my office and read reasonably current newspapers and trade magazines. While scanning the articles, I quickly identified many opportunities for new insurance products, mostly around shared assets. For example, an article on millennials and the sharing economy explained that (primarily young) people monetize their lives by sending selfies of what there are wearing every day to a website called CovetMe, and they get paid based on the brands and looks they are sporting.
They Uber their way to work, school, or social events (when did Uber become a verb?) as a driver or passenger; they use their subscription to a shared car service such as Zipcar to take occasional trips, or they get paid for allowing advertising on their own car by subscribing to companies such as Carvertise®. Another innovative example related to sharing cars is FlightCar, which gives you free parking at big airports if you let other travelers use your parked car when you are travelling. Similar sharing activities take place with homes, clothing and accessories, occasionally-used tools and equipment, and even medical equipment.
All of these shared assets need to be covered in different ways than the traditional, personal lines home owner’s or car insurance policies. Occasionally renting out assets to third parties or shared ownership of one asset between non-family members creates a different risk profile than self-use only, both for property coverages and especially for liability.
Think about deductible coverage between multiple owners in case of a claim, good driver discounts, or multiple non-familial owners getting involved in the same accident, as liable parties and as claimants. The insurance market has been pondering insurance solutions for the shared economy for a while now, and found ways to cover Uber drivers or Airbnb landlords, or offer non-owner car insurance. As an industry, however, we defaulted to our classical model of insurance and put a commercial coverage, bought by the shared economy company for their members, on top of individual personal insurances where needed. It works; but as one can imagine, it is a bit clunky. Especially on larger claims, I expect delays and issues to occur concerning liability, wear and tear, acceptable use of assets, and confusion around which policy should pay followed by subrogation. Now, most shared economy companies have stated that they will reimburse their members for losses and will figure out later what is covered by which insurance. This is a good thing for their members, of course, but it doesn’t necessarily help insurers very much.
We should be able to do better and create truly new insurance coverages for the shared economy. For example, why wouldn’t an insurer work with one of the new tech companies that provides people with a cloud solution to document all of their assets with pictures, videos, sales receipts, or warranty documents? Why wouldn’t they create a comprehensive coverage for property and liability for all these clients’ assets, under the assumption that they will be shared? Tag the key assets with a sensor and learn from usage data. Use telematics data on the car use. Limit home rentals to one or two partner companies, and learn from usage analytics. Why wouldn’t a carrier try to pilot this with a segment of young people with limited assets, in a single location?
I know that this is not a simple proposition, and that in creating these kind of coverages, many hurdles will be encountered. I do think, however, that the market is ready for it, and that the shared economy will become a force to be reckoned with in the near future. So, we might as well figure out how to insure and service that force. As my colleague Mark Breading stated in his recent research brief, Insurance in the Connected World:Observations on Opportunities and Threats, “Actively participating in the rapidly growing sharing economy will be critical for personal lines insurers. Asset ownership is shifting and requiring a different approach for managing and protecting the assets.” It is not going to be easy, but customers will count on our industry to develop solutions to protect their shared assets. We have successfully been supporting changing economies and technologies for centuries now – I am sure we’ll also find a solution for the new shared economy in a connected world.
This blog entry has been republished with permission
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