Lloyds Report on Sharing Economy is a Wake-Up for Insurance Industry

A few days ago, Lloyd’s, published a report called, “Sharing risks, sharing rewards: who should bear the risk in the sharing economy?”, analysing risk perceptions in a booming industry sector, which has seen the rise of AirBnB, holiday home swap websites, ride-sharing apps and more.

The sharing of assets and services creates new opportunities but also new risks. It can be difficult for traditional insurance coverages to be applied to disruptive sharing economy models as assets are fragmented – owned and shared amongst users.

“In our work with sharing economy platforms, we’ve found that insurance not only protects against financial loss, but it also enables growth,” said Vincent Vandendael, Chief Commercial Officer at Lloyd’s.

“Based on our findings, instilling consumers with confidence by clearly defining and protecting against risk can help remove barriers to engagement in the sharing economy. There is no doubt shared platforms are growing at a lightning pace, so it’s important that the insurance products created for these companies are able to grow and change with them – from a ten person startup to a global disruptor.”

Insurers have long provided insurance solutions for ‘tangible’ physical assets, but in the sharing economy assets are often intangible including intellectual property, trust and reputation. Assets in the sharing economy are fragmented as they are owned and shared among various parties requiring a different approach to risk management based on the behavioural economics of consumer preferences and attitudes toward risk.

Both sharing economy consumers and providers cite a number of concerns around risk – including personal safety, quality of service, damage to assets, theft and lack of sufficient safeguards in the event something goes wrong.

Key findings from the report include:

Despite exponential growth, untapped supply and demand remain on the sidelines of the sharing economy:

  • Nearly half of US consumer respondents (49%) reported having never used a sharing economy product or service.
  • On the provider side, just 8% of US consumer respondents have provided an asset or service through a sharing economy site.

Sharing economy consumers are sceptical:

  • Consumers globally cite personal safety (52%) as their greatest concern, but they’re also worried about quality of service (42%), damage to assets (42%), theft (40%), and lack of sufficient safeguards in the event something goes wrong (38%).
  • Consumers and providers recognise the benefits of shared goods and services, including affordability and convenience, but for the majority of UK and US consumers (58%) the risks outweigh the benefits.
  • Risk reduction could unlock sharing economy growth opportunities:
  • Nearly all survey respondents (97%) assume some sort of risk protection is offered for consumers and providers, but only 28% reported looking in detail to ensure specific coverage exists for the shared service/product they use.
  • The majority of consumers (53%) are looking to sharing economy platforms to provide protection, while most sharing economy platforms surveyed indicate that either the consumer (53%) or provider (27%) should bear responsibility.
  • The majority of consumers globally would be more comfortable using sharing economy services if insurance was offered (71%) and more likely to consider sharing or offering a service if insurance was offered (70%).
  • Most current providers (78%) believe they would get more customers if insurance was offered.

Insurance Edge Comment;

There is huge pent-up demand for truly flexible on-demand insurance. From a week’s travel cover on a camera, smartphone and tablet, to having a ride in a friend’s classic car for a summer weekend, consumers want the risk covered, online, at a reasonable rate.

This is where Artificial Intelligence can really be a tool for growth, as consumers build portable data profiles, which can be held securely and offer insurers the chance to instantly track the lifestyle and history of potential customers. There’s much more to assessing a driver’s risk than the simple NCD check, plus a postcode. This is where new tech such as Alexa can offer real insights into people’s real lives. If you can profile the person, you can also pinpoint the level of risk and this is where the industry needs to go in the future.

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